TONGA
Country Profile |
|
External Website: Tonga
Online
Map of Tonga
- I. EXECUTIVE SUMMARY
- II. POLITICAL ENVIRONMENT
- Political System
- Orientation of Major Political
Parties
- III. MARKETING U.S. PRODUCTS AND
SERVICES
- Distribution and Sales Channels
- Use of Agents and
Distributors: Finding a Partner
- Franchising
- Direct Marketing
- Joint Ventures/Private Ownership
- Steps to Establishing an Office
- Selling Factors/Techniques
- Advertising
- Pricing Product
- Sales Service/Customer Support
- Selling to the Government
- Intellectual Property Rights
Protection
- Need for a Local Attorney
- IV. LEADING SECTORS
FOR U.S. EXPORTS AND INVESTMENT
- Best Prospects for
Non-Agricultural Goods and Services
- Best Prospects for Agricultural
Products
- V. TRADE REGULATIONS AND STANDARDS
- Trade Barriers
- Customs Valuation
- Import Licenses
- Export Controls
- Import/Export Documentation
- Temporary Entry
- Labeling, Marking Requirements
- Prohibited Imports
- Standards
- Free Trade Zones/Warehouses
- Special Import Provisions
- Membership in Free Trade Agreements
- VI. INVESTMENT CLIMATE
- Openness to Foreign Investments
- Transfer Policies
- Expropriation and Compensation
- Dispute Settlement
- Political Violence
- Performance Requirements and
Incentives
- Taxes
- Right to Private
Ownership/Establishment
- Protection of Property Rights
- Regulatory System
- Bilateral Investment Agreements
- OPIC and Other Investment
Insurance Programs
- Labor
- Foreign Trade Zones/Free Ports
- Capital Outflow Policy
- VII. TRADE AND PROJECT FINANCING
- Brief Description of Banking System
- Foreign Exchange Controls
Affecting Trade
- General Financing Availability
- Export Finance/Methods of Payment
- Export Financing and Insurance
- Project Financing
- List of Banks
with Corresponding US Banking Arrangements
- VIII. BUSINESS TRAVEL
- Business Customs
- Travel Advisory and Visas
- Holidays
- Business Infrastructure
- IX. APPENDICES
- Appendix A - Country Data
- Appendix B - Domestic Economy
- Appendix C - Trade
- Appendix D - Development Assistance
- Appendix E - Contact Information
 
I. EXECUTIVE SUMMARY
The kingdom of Tonga is made up of over 170 islands, 36 of which are permanently
inhabited. The islands are divided into three main groups. The first group, Tongatapu and
‘Eua is the largest and most heavily populated with 68% of the population residing on
the main island of Tongatapu. The other two groups are called, Ha‘apai and Vavau. The
eastern islands are mainly coral atolls and the western islands are mainly volcanic, with
four islands having active volcanoes.
The economy relies heavily on agriculture. There have been efforts over the past decade
to diversify the economy. The government has explored a number of possibilities ranging
from staking claims for satellite positions which are suitable for trans-Pacific
communications to leasing land in American Samoa from which to export root crops and other
vegetables. Tonga has the best per capita growth performance of independent Pacific Island
economies of the last decade.
The Tongan economy faces many of the problems other Pacific Island economies do. It is
fairly isolated geographically, the agriculture-dependent economy is vulnerable to
external influences, both economic and natural, and the government is fairly dependent on
foreign aid. Recently and increase in income-per-capita led Tonga to lose its 'least
developed country' status which resulted in a cut in foreign aid. The government now has a
rolling five-year development program which aims to diversify and boost the economy. The
program includes plans to expand industry, exports and tourism, and to promote Tonga as an
offshore banking center.
The government of Tonga actively encourages trade and investment and offers several
fiscal and monetary packages to investors in order to attract business to the nation.
Tonga's main trading partners are Japan, the United States, New Zealand and Canada.
II. POLITICAL ENVIRONMENT
Political System
Tonga is a constitutional monarchy which became independent in 1970. The king is the
head of state and holds a significant amount of power. The government is made up of the
Legislative Assembly, the
Privy Council and the judiciary. Nine members of the Legislative Assembly are elected
by universal suffrage; three from Tongatapu, two each from Ha‘apai and Vava‘u
and one each from Niua and Niua Fa‘ou. There are 33 nobles of Tonga who choose nine
nobles to serve on the Legislative Assembly. The Privy Council, also part of the
Legislative Assembly, is made up of the king and the cabinet. The cabinet is appointed by
the king and is made up of the prime minister, the deputy prime minister, eight other
ministers and the governors of Ha‘apai and Vava‘u. The speaker of the
Legislative Assembly is appointed by the king.
The judiciary system is modeled after the English system. The Privy Council becomes the
court of appeal when the chief justice is present.
Orientation of Major Political
Parties
Since there are only nine elected officials and the rest serve until they retire, there
is an underdeveloped party system. Only one party, the People's Party (PP) holds a
significant amount of power. Formed in the early 1990s, the PP won four of the nine
elected seats in 1996 and two more seats were won by pro-democracy candidates. While the
pro-democracy movement has grown more influential in recent years, a change in the
political system does not appear to be imminent.
III. MARKETING U.S. PRODUCTS AND
SERVICES
Distribution and Sales Channels
No information
Use of Agents and
Distributors: Finding a Partner
No information
Franchising
No information
Direct Marketing
No information
Joint Ventures/Private Ownership
The government allows full ownership by a foreign investor in cases where manufacturing
activities are using imported raw materials for export. If the investments are too large
for local investors to participate, the government may also allow full foreign ownership.
While each project is considered individually, the government generally encourages joint
ventures.
Steps to Establishing an Office
All applications for investment in Tonga should be made through the Ministry of Labor,
Commerce and Industries which is Tonga's one stop service for business proposals.
Partnerships, limited liability companies and public companies are all permitted
business entities in Tonga.
Selling Factors/Techniques
No information
Advertising
There are several press channels which may offer advertising:
Newspapers:
- Eva, Your Guide to Tonga; POB 427, Nuku‘alofa; tel. 25779; fax. 24749;
e-mail. vapress@candw.to; 6 a year; circ. 4,000.
- Matangi Tonga; POB 427; Nuku‘alofa; tel. 25779; fax. 24749; e-mail. vapress@candw.to; 4 a year, national news magazine
- The Times of Tonga/Koe Taimi‘o Tonga; Nuku‘alofa; weekly; English
edition covers Pacific and world news; Tongan edition covers local news
- Tonga Chronicle/Kalonikali Tonga; POB 197, Nuku‘alofa; tel. 21300;
government sponsored; weekly; circ. 6,000 (Tongan) 1,200 (English)
Radio and Television:
Tonga Broadcasting Commission; POB 36, Nuku‘alofa; telex. 66225; fax.
24417; independent statutory body; commercially operated; programs in Tongan and English
Oceania Broadcasting began relaying American television programs in 1991.
Pricing Product
No information
Sales Service/Customer Support
No information
Selling to the Government
No information
Intellectual Property Rights
Protection
Intellectual property, copyrights, patents or trademarks, are all registered in Tonga
provided that they have first been registered in England under English law.
Need for a Local Attorney
No information
IV. LEADING SECTORS
FOR U.S. EXPORTS AND INVESTMENT
Best Prospects for
Non-Agricultural Goods and Services
- Tourism:
-
- The tourism industry in Tonga is still growing and there is potential for more growth.
The climate in Tonga, although slightly cooler than in other Pacific Island nations, is
mild year-round and there are many scenic areas. Tonga is also the second place to see the
millenium, after Kiribati, with its location on the international date line. Currently
Tonga attracts pleasure yachts, cruise passengers and tourists mainly from New Zealand,
Australia, and the United States.
-
- Investing in the tourism industry in Tonga carries several incentives. Hotel
accommodations, yacht charters, golf island cruises, game fishing, and other tourist
attractions all qualify the investor for tax holidays and other financial incentives.
-
- Manufacturing:
-
- The manufacturing sector is also quite small. Manufacturing, mining, construction, and
the power industry combined accounted for 13.1% of GDP in 1995. The main manufacturing
activities are the production of concrete blocks, clothing, furniture, handicrafts,
coconut oil and brewing. Exports of manufactured goods consist of leather goods,
handicrafts and the root vegetable kava. There is also a handicraft industry aimed at the
tourist market and handicraft exports are increasing in value.
-
- There are opportunities for investment in export-oriented manufacturing and the
processing of natural resources.
Best Prospects for Agricultural
Products
- Agriculture:
-
- About 60% of the population is involved in agriculture as their main source of revenue.
Agriculture is the base of the Tongan economy and earns around 90% of export revenues. The
main crops are squash, coconuts, bananas, kava, vanilla and other tropical fruits and
vegetables.
-
- The economy is very dependent on agricultural exports with the two main exports being
squash and vanilla. In 1994 exports of squash pumpkins to Japan accounted for over 60% of
export earnings. The demand for vanilla is increasing, especially for the more expensive
organic vanilla. In 1996 the 10 tons of vanilla and 8 tons of organic vanilla which were
exported resulted in revenues of US$ 45/kg and US$ 85/kg respectively. TongaTrade, the
export marketing and promotion division of the Ministry of Labor, Commerce and Industry
recently negotiated a contract with a U.S. importer for the sale of vanilla beans which
represents a 456% increase on prices.
-
- Fisheries and marine investments:
-
- There is a large resource base for fishing in Tonga which still has a lot of room for
development. Research on Tonga's ocean resources has shown that there is a large tuna flow
through Tonga's waters along with a variety of other fish species which hold potential for
annual catches of up to 10,000 tons (skipjack). The ANZ Bank suggested that a freezing and
canning facility could be based in Tonga for the tuna resources.
-
- While the potential for fishing is great in most Tongan waters, the inshore waters of
Tonga are over-fished and conservation measures have recently been implemented in order to
preserve resources in the new industry. Among other measures, hunting certain marine
mammals has been prohibited during breeding season and the use of dynamite has been
banned.
There is currently little mining activity but, copper and zinc deposits have been
discovered in Tonga. Evidence has also shown that there are oil deposits in the Tonga
Trench. Manganese prospecting is also in progress.
V. TRADE REGULATIONS AND STANDARDS
Trade Barriers
No information
Customs Valuation
No information
Import Licenses
No information
Export Controls
No information
Import/Export Documentation
No information
Temporary Entry
No information
Labeling, Marking Requirements
No information
Prohibited Imports
No information
Standards
No information
Free Trade Zones/Warehouses
No information
Special Import Provisions
No information
Membership in Free Trade Agreements
No information
VI. INVESTMENT CLIMATE
Openness to Foreign Investments
No information
Transfer Policies
There are no restrictions on the repatriation of funds.
Expropriation and Compensation
No information
Dispute Settlement
Disputes are normally settled by the courts using official registered documents.
Political Violence
No information
Performance Requirements and
Incentives
A company must export 90% of its products overseas in order to be considered an export
oriented industry. Once declared an export oriented industry, the company is entitled to
import all capital equipment and raw material duty free with exemptions from port and
services taxes.
There are a number of tax incentives which are extended to foreign investors. They
include tax holidays, exemptions from customs duty, adjusted rates of port and service tax
and generous fund repatriations granted on a case by case basis.
Taxes
Taxes in Tonga include:
- 15% company tax on profits up to $100,000 and 30% on top of the first $100,000
- 38% tax on profits made by companies registered overseas operating a registered business
in Tonga
- 2.5% Room tax
- 5% Goods and services tax on the value of goods
- 20% ports and services tax
Import tax is levied as the following customs duties:
- + 15% for food preparations and raw materials (although there are a number of exemptions
to these duties)
- + 20% for sundry textiles
- + 45% for cars, trucks and vans
Right to Private
Ownership/Establishment
No information
Protection of Property Rights
No information
Regulatory System
No information
Bilateral Investment Agreements
No information
OPIC and Other Investment
Insurance Programs
The Overseas Private Investment Corporation (OPIC) is extended to the Tonga and
provides political risk insurance, finance, direct loans and loan guarantees.
Labor
No information
Foreign Trade Zones/Free Ports
No information
Capital Outflow Policy
No information
VII. TRADE AND PROJECT FINANCING
Brief Description of Banking System
No information
Foreign Exchange Controls
Affecting Trade
No information
General Financing Availability
No information
Export Finance/Methods of Payment
No information
Export Financing and Insurance
No information
Project Financing
In order to promote broadly based economic growth, the International Bank for
Reconstruction and Development (IBRD), a member of the World Bank group, makes long-term
loans at market related prices. They usually focus on structural adjustment, sector reform
and individual project lending. Instead of financing a whole project, the IBRD normally
finances parts of project purchases with foreign exchange, which are on typically 40% of
the total project cost. Projects may cover a variety of sectors and can involve many
separate contracts. In turn, these will provide export business opportunities for
suppliers worldwide.
The Asian Development Bank (ADB) is an international financial development bank which
has its headquarters in the Philippines. In order to promote social and economic progress
in its developing member countries, the ADB lent $5.5 billion in 1995. There are 56 member
countries in the ADB with the United States and Japan being the largest shareholders. The
largest portion of funds were lent to the energy sector followed by social infrastructure,
transport, communications, agriculture and agro-industry, finance, industry and non-fuel
minerals. The ADB's aims in its medium-term strategy are to reduce poverty, improve the
status of women, aid in population planning, and environmental protection. The bank is
taking the role of a catalyst for development and will use its financial resources along
with co-financing and other techniques to attract private capital in funding the
development needs of its member countries.
There is a Commercial Liaison Office (CLO) in Manila at the U.S. Embassy. The CLO
reports directly to the Office of Multilateral Development Banks at the U.S. Department of
Commerce. It assists American suppliers and consultants in winning contracts for projects
and activities funded by the Bank. The CLO includes a Senior Commercial Officer and two
Commercial Specialists, one of which represents the U.S. Agency for International
Development's United States-Asia Environmental Partnership.
Further information is available from the U.S. Department of Commerce.
List of Banks
with Corresponding US Banking Arrangements
No information
VIII. BUSINESS TRAVEL
Business Customs
The business language in Tonga is English.
Dress in Tonga is casual, although it is prohibited for anyone to appear in public
without a shirt.
Business hours are as follows:
- Business Monday - Friday, 8:30am - 5:30pm
- Government Monday - Friday, 8:30am - 4:30pm
- Shops Monday - Friday, 8:30am - 1:00pm, 2:00pm to 5:00pm
- Saturday, 8:00am - 12:00pm
- Banks
- Monday - Friday, 9:00am - 3:00pm (Bank of Tonga)
- 9:00am - 3:30pm (ANZ Bank)
- 9:00am - 4:00pm (Malaysian Borneo-Finance)
- Saturday, 8:30am to11:30am
- Post Offices Monday - Friday, 8:30am - 4:30pm
Travel Advisory and Visas
No information
Holidays
- New Years Day January 1
- Easter Variable
- Anzac Day April 25
- Birthday of HRH Crown Prince Tupouto‘a May 4
- Emancipation Day June 4
- Birthday of His Majesty King June 30-
- Taufa‘ahau Tupou IV July 4
- Constitution Day November 4
- King Tupou I Day December 4
- Christmas Day December 25
- Boxing Day December 26
Business Infrastructure
- Transportation - Air:
-
- There are two international airports in Tonga. Fua‘amotu International Airport is
located 21km from Nuku‘alofa on Tongatapu and Lupepau‘u International Airport is
located on Vava‘u. Air services that run to and from Tonga are Royal Tongan Airlines,
Air Pacific, Air New Zealand, Polynesian Airlines and Samoa Air.
-
- Domestic flights run between the islands daily. Royal Tongan Airlines links Tongatapu,
Vava‘u, Ha‘apai, ‘Eua, and Niuatoputapu.
-
- Transportation - Sea:
-
- The two main ports are located in Nuku‘alofa and Neiafu. There is a containerized
freight service which runs between Tonga and Australia and there is a cargo service which
runs to Europe. The government owns the Shipping Corporation of Polynesia which runs
regular inter-island services.
-
- Ferries service the outer islands once a week. Schedules are available at the Tonga
Visitors Bureau in Nuku‘alofa.
-
- Transportation - Roads:
-
- There are about 198km of main roads, 52km of which are covered with metal surfaces and
the remainder covered with impacted coral. There are about 150km of secondary roads.
-
- While horse traffic is not uncommon, the main form of transportation in Tonga is by bus,
car or passenger ferries. In order to rent a car an international drivers license, a
passport and T$10 are required. Eighteen is the legal driving age. Driving is done on the
left side of the road.
-
- Telecommunications:
-
- Telephone IDD is available in Tonga. Cable and Wireless offers Internet, telex, fax and
cable messages. Telecommunications facilities are offered at most hotels and at Tonga
Telecommunication Commission in Nuku‘alofa. Recently Tonga underwent a massive
upgrade of its communications systems. The analogue system which was used was replaced by
a digital system which will increase the number of phone lines by over 2300 lines. It will
also change several phone number prefixes.
-
- Mail:
-
- There are post offices in Ha‘apai, Vavu‘u and the main one is in
Nuku‘alofa. Mail must be picked up personally from each post office as there are no
postal deliveries. Air mail to Europe takes around ten days.
- Electricity:
-
- Electricity runs on 240 volts AC, 50Hz
IX. APPENDICES
Appendix A - Country Data
| Population |
97,446 (1996 census) |
| Population Growth Rate |
0.3% avg. from 1986-1996 |
| Religion(s) |
Christianity - Wesleyan, Roman Catholic, Anglican, Seventh Day Adventist |
| Government |
Constitutional Monarchy |
| Official Languages |
Tongan and English (French is commonly spoken) |
| Currency |
Tongan dollar ($T) |
Appendix B - Domestic Economy
| |
1993 |
1994 |
1995 |
1996 |
1997 |
| GDP: ($T million) |
201.0 |
214.8 |
229.5 |
343.5 |
n/a |
| GDP Growth Rate (%) |
4.7 |
2.6 |
1.6 |
3.0 |
n/a |
| Inflation (% change per year) |
0.9 |
1.1 |
1.4 |
3.0 |
2.1 |
| Trade Balance ($US M) |
-37 |
-40 |
-48 |
-61 |
n/a |
| Foreign Exch. Reserves ($US M) |
37.06 |
35.54 |
28.71 |
30.62 |
27.49 |
| Official Exchange Rate ($T/$US) |
1.38 |
1.32 |
1.27 |
1.23 |
1.26 |
| Total External Debt ($US M) |
44.2 |
64.4 |
70.1 |
69.6 |
n/a |
| Debt Service ratio (%) |
3.1 |
4.5 |
5.0 |
4.9 |
n/a |
Appendix C - Trade
| |
1993 |
1994 |
1995 |
1996 |
1997 |
| Exports fob ($US m) |
16.1 |
13.9 |
14.6 |
15.3 |
n/a |
| Imports fob ($US m) |
56.6 |
68.9 |
77.2 |
82.9 |
n/a |
| Principal Exports fob 1995 ($US m) |
Squash (6.6) |
Fish products (3.4) |
Vanilla (2.2) |
|
| Principal Imports cif 1995 ($US m) |
Food (17.6) |
Machinery and transport equipment (16.0) |
Basic manufactures (15.0) |
Mineral fuels (9.6) |
Sources: The Economist
Intelligence Unit, Ltd. 1998, "Economic Intelligence Unit Country Profiles'"
1998-1999 |
Appendix D - Development
Assistance
| ($US million) |
1992 |
1993 |
1994 |
1995 |
1996 |
| Bilateral |
19.7 |
24.2 |
21.9 |
28.8 |
26.7 |
| Japan |
5.9 |
12.1 |
8.7 |
14.4 |
11.5 |
| Australia |
8.7 |
7.1 |
8.5 |
8.1 |
8.1 |
| New Zealand |
3.4 |
4.6 |
3.4 |
5.1 |
5.6 |
| Multilateral |
4.0 |
7.1 |
13.3 |
10.0 |
5.3 |
| EU |
1.1 |
2.6 |
4.4 |
0.7 |
1.1 |
| ADB |
1.6 |
2.8 |
5.8 |
6.8 |
2.7 |
Source: The
Economist Intelligence Unit, Ltd. 1998, "Economic Intelligence Unit Country
Profiles'" 1998-1999 |
Appendix E
US and Country Contacts
- Office of Pacific Island Affairs
- EAP/PIA
- Room 5317, N.S.
- U.S. Department of State
- Washington, D.C. 20520-6310
- phone: 202-647-3546
- fax: 2002-647-0118
-
- Office of the Pacific Basin
- International Trade Administration
- U.S. Department of Commerce
- Washington, D.C. 20230
- phone: 202-482-2954
- fax:202-482-5330
-
- Department of Agriculture
- Foreign Agricultural Service
- Trade Assistance and Promotion Office
- Washington, D.C. 20433
- phone: 202-720-7420
Multilateral Development Bank Contacts
- U.S. Department of Commerce
- Liaison to the U.S. Executive Director's Office
- International Bank for Reconstruction and Development
- Room D-13004
- 1818 H St., NW
- Washington, D.C. 20433
- phone: 202-458-0118
- fax: 202-477-2967
-
- Cantwell Walsh, Senior Commercial Officer
- ADB Liaison Office
- U.S. Embassy, Manila
- APO AP 96440
- fax: 632-816-7684
- e-mail: cwalsh@doc.gov
-
- Janet Thomas, Acting Director
- Multilateral Development Bank Office
- U.S. Department of Commerce
- 14th and Constitution, N.W.
- Washington, D.C. 20007
- phone: 202-482-3399
- fax: 202-482-5179
-
- U.S. Peace Corps
- PO Box 147, Nuku‘alofa
- tel. 21466
- fax. 21467
Government Offices
- Office of the Prime Minister
- PO Box 62, Nuku‘alofa
- tel. 21300
- fax. 23888
-
- Ministry of Agriculture & Forestry
- PO Box 14, Nuku‘alofa
- tel. 23038
- fax. 23039
-
- Ministry of Civil Action
- PO Box 845, Nuku‘alofa
- tel. 24144
- fax. 24145
-
- Ministry of Education
- PO Box 61, Nuku‘alofa
- tel. 23511
- fax. 23596
-
- Ministry of Finance
- PO Box 87, Nuku‘alofa
- tel. 23066
- fax. 21010
-
- Ministry of Fisheries
- PO Box 871, Nuku‘alofa
- tel. 21399
- fax. 23891
-
- Ministry of Foreign Affairs
- PO Box 821, Nuku‘alofa
- tel. 23600
- fax. 23360
-
- Ministry Labor, Commerce and Industries
- PO Box 110, Nuku‘alofa
- tel. 23688
- fax. 23887
- e-mail: tongatrade@candw.to
-
- Ministry of Land, Survey and Natural Resources
- PO Box 5, Nuku‘alofa
- tel. 23611
- fax. 23211
-
- Ministry of Marine
- PO Box 397, Nuku‘alofa
- tel. 22555
- fax. 24267
-
- Ministry of Works
- PO Box 8, Nuku‘alofa
- tel. 23100
- fax. 23102
   
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