72650 v1 World Trade Indicators 2009/10 Kiribati Trade Brief Trade Policy country (LDC) by the UN, Kiribati benefits from preferential tariff rates from a number of trading Kiribati is a small island nation with an economy that partners, including its largest, Japan. The country was is extremely dependent on global employment and up for review to determine whether it should graduate demand. Import tariffs remain an important source of from its LDC status in 2009 (to be implemented in fiscal revenues as Kiribati’s domestic revenue base is 2012), after which an estimated 37 percent of its unpredictable and narrow. Other domestic tax sources merchandise exports would be subject to low tariffs. are limited and underdeveloped, partly due to the In March 2009 the country was found not eligible for absence of any significant private sector activity on the graduation.1 islands. As a result, the simple average of the MFN applied tariff rate remains significantly higher than the Kiribati has ratified the Pacific Island Countries Trade average for both the East Asia and Pacific region and Agreements (PICTA), together with 10 other countries lower-middle-income countries, standing at 17.3 out of 14 members of the Pacific Islands Forum (the percent in the most recent year (2006) compared with Forum Island Countries) that signed it in 2001.2 10.5 and 11.9 percent, respectively that same year. PICTA, an agreement for free trade in goods, and, in Based on the MFN applied tariff, Kiribati ranked 161st future, services, falls under the broader Pacific out of 181 countries (where 1st is least restrictive). Agreement on Closer Economic Relations (PACER) Most people in the country are engaged in subsistence that in addition to the Pacific Island Countries also fishing or farming and the top exports are fishing and includes Australia and New Zealand.3 In August 2009, agricultural goods. As a result, the government has leaders of the Pacific Island Forum agreed to start placed a relatively high tariff of 23.8 percent on negotiating PACER plus, a free trade agreement that agricultural goods, compared with 16.3 percent for would include Australia and New Zealand as well as non-agricultural goods. Kiribati’s maximum tariff on the Forum Island Countries and that would cover all goods (excluding alcohol and tobacco) was 100 goods, services, and investment.4 The EU is currently percent in 2006. negotiating a comprehensive regional Economic Partnership Agreement (EPA) with all 14 signatories of PICTA. In the meantime, Kiribati continues to External Environment benefit from the “Everything But Arms� initiative The simple average of the rest of the world tariff faced under which its exports have duty-free and quota-free by Kiribati’s exports is 10.2 percent. When taking into access to the EU market. account the volume of exports it is 1.2 percent, with only a slight difference between agricultural and non- Behind the Border Constraints agricultural goods. Over the course of 2008, the real effective exchange rate of Kiribati’s currency, the Kiribati remained in the top half of international Australian dollar, appreciated by 3.6 percent, making business environments in 2009, being ranked 79th out exports less competitive. Considered a least developed of 183 countries in the Ease of Doing Business index. Limited transportation services present a considerable barrier to Kiribati’s trade activities, as most internal Unless otherwise indicated, all data are as of August 2009 transport is by boat. Kiribati ranked 77th in the and are drawn from the World Trade Indicators 2009/10 Trading Across Borders subcategory of the index, Database. The database, Country Trade Briefs and which is a measure of the procedural steps necessary as well as the amount of time and money required to Trade-at-a-Glance Tables, are available at import or export goods. http://www.worldbank.org/wti. If using information from this brief, please provide the following source citation: World Bank. 2010. “Kiribati Trade Outcomes Trade Brief.� World Trade Indicators 2009/10: Country Trade Almost half of Kiribati’s GDP in 2008 came from Briefs. Washington, DC: World Bank. Available at external sources, including fishing licenses and http://www.worldbank.org/wti. World Trade Indicators 2009/10 Kiribati Trade Brief remittances. Kiribati’s main exports are copra (which Department of Economic and Social Affairs. October accounts for two thirds of exports), pet fish, shark 2008. “Ex-Ante Impact Assessment of Likely fins, and seaweed. In 2008, copra exports declined by Consequences of Graduation of the Republic of 21.3 percent in nominal U.S. dollar terms.5 Kiribati is Kiribati from the Least Developed Country highly dependent on imports of food and fuel and as a Category.� United Nations, New York. July 1, 2009. result, higher commodity prices, especially for food imports during 2008. Although potential exists for International Monetary Fund (IMF). 2009. “IMF Kiribati to develop its marine and tourism industries, Executive Board Concludes 2009 Article IV the remoteness of the country and lack of Consultation with Kiribati.� Public Information infrastructure make this a challenging task.6 The Notice N. 09/54, May 12, 2009. IMF. June 30, 2009. majority of tourists come from Australia, Fiji, New . experiencing slowdowns in growth in 2008. However, Kelsey, Jane. April 2004. “Big Brothers Behaving Badly: tourist arrivals from these countries actually rose in The Implications for the Pacific Islands of the 2008 over their 2007 values. As a result of the fall in Pacific Agreement on Closer Economic Relations the number of tourists arriving from the United States, (PACER).� Pacific Network on Globalisation Japan, and other countries, however, total tourist (PANG). . Kiribati National Statistics Office. 2009a. “Production- Notes Copra.� . 1. Department of Economic and Social Affairs, 2008, pp. ———. 2009b. “Tourism Statistics.� . 3. Pacific Islands Forum Secretariat and Jane Kelsey, Pacific Islands Forum Secretariat. “Regional Trade.� April 2004, p. 18. September 10, 2009. . 5. Kiribati National Statistics Office, 2009a. ———. August 2009. “Fortieth Pacific Islands Forum: 6. IMF, May 2009. Forum Communique.� September 10, 2009. 7. Kiribati National Statistics Office, 2009b. . Bilaterals.org. April 2009. “PACER & PICTA.� Bilaterals.org. June 29, 2009 .