Niue - Economy

Economy

Niue's economy is small, with a GDP of NZ$17 million in 2003, or US$10 million at purchasing power parity. Most economic activity revolves around the government, as the government was traditionally in charge of organising and managing the affairs of the new country since 1974. However, since the economy has reached a stage where state regulation may now give way to the private sector, there is an ongoing effort to develop the private sector. Following Cyclone Heta, the government made a major commitment towards rehabilitating and developing the private sector.

The government allocated $1 million for the private sector, which was spent on helping businesses devastated by the cyclone, and on the construction of the Fonuakula Industrial Park. This industrial park is now completed and some businesses are already operating from it. The Fonuakula Industrial Park is managed by the Niue Business Centre, a quasi-governmental organisation providing advisory services to businesses.

Most Niuean families grow their own food crops for subsistence and some are sold at the Niue Makete in Alofi, some exported to their families in New Zealand. The Niuean taro is known in Samoa as "talo Niue" and in international markets as pink taro. Niue also exports taro to the New Zealand market. The Niue taro is a natural variety and is very resistant to pests.

The Niue Government and the Reef Group from New Zealand started two joint ventures in 2003 and 2004 involving the development of the fisheries and noni (Morinda citrifolia, a small tree with edible fruit). The Niue Fish Processors, Ltd is a joint venture company processing fresh fish, mainly tuna (yellow fin, big eye and albacore), for export to the overseas markets. NFP operates out of their state-of-the-art fish plant in Amanau Alofi South, completed and opened in October 2004.

In August 2005, an Australian mining company, Yamarna Goldfields, suggested that Niue might have the world's largest deposit of uranium. By early September these hopes were seen as overoptimistic, and in late October the company cancelled its plans to mine, announcing that exploration drilling had identified nothing of commercial value. The Australian Securities and Investments Commission filed charges in January 2007 against two directors of the company, now called Mining Projects Group Ltd, alleging that their conduct was deceptive and they engaged in insider trading. This case was settled out of court in July 2008, both sides withdrawing their claims. There is an Australian company that had been issued a mineral prospecting license in the early 1970s which is still very active in doing research and collecting data on potential mineral deposits on Niue.

Remittances from Niuean expatriates were a major source of foreign exchange in the 1970s and early 1980s. The continuous migration of Niueans to New Zealand has shifted most members of nuclear and extended families to New Zealand, removing the need to send remittances back home. In the late 1990s, PFTAC conducted studies on the Niue balance of payments, which confirmed that Niueans are receiving little remittances but are sending more money overseas, mainly for paying for imported goods and for the education of Niuean students sent to study in New Zealand.

Foreign aid, principally from New Zealand, has been the island's principal source of income. Although most Niuean foreign aid comes from New Zealand the island nation is currently losing $250,000 NZ a year (i.e. reduce in New Zealand funding) meaning the country will come to rely upon its own economy more in times to come.

Government expenses consistently exceed revenue to a substantial degree, with aid from New Zealand subsidizing public service payrolls. The government also generates some revenue, mainly from income tax, import tax and the lease of phone lines. The government briefly flirted with the creation of "offshore banking", but, under pressure from the US Treasury, agreed to end its support for schemes designed to minimize tax in countries like New Zealand. Niue now provides an automated Companies Registration, which is administered by the New Zealand Ministry of Economic Development. The Niue Legislative Assembly passed the Niue Consumption Tax Act in the first week of February 2009, and the 12.5% tax on good and services is expected to come into effect on 1 April 2009. Income tax has been lowered, and import tax may be reset to zero except for "sin" items like tobacco, alcohol and soft drinks. Tax on secondary income has been lowered from 35% to 10%, with the stated goal of fostering increased labour productivity.

In 1997, the Internet Assigned Numbers Authority (IANA), under contract with the US Department of Commerce, assigned the Internet Users Society-Niue (IUS-N), a private charity, as manager of the .nu top-level domain on the Internet. IUS-N's charitable purpose was — and continues to be — to use revenue from registering .nu domain names to fund low-cost or free Internet services for the people of Niue. In a letter to ICANN in 2007, IUS-N's independent auditors reported IUS-N had invested US$3 million for Internet services in Niue between 1999 and 2005 from .nu domain name registration revenue during that period. In 1999, IUS-N and the Government of Niue signed an agreement whereby the Government recognized that IUS-N managed the .nu ccTLD under IANA's authority and IUS-N committed to provide free Internet services to government departments as well as to Niue's private citizens. A newly elected Government later disputed that agreement and attempted to assert a claim on the domain name, including a requirement for IUS-N to make direct payments of compensation to the Government. In 2005, a Government-appointed Commission of Inquiry into the dispute released its report, which found no merit in the government's claims; the government subsequently dismissed the claims in 2007. Starting in 2003, IUS-N began installing WiFi connections throughout the capital village of Alofi and in several nearby villages and schools, and has been expanding WiFi coverage into the outer villages since then, making Niue the first WiFi Nation. To assure security for Government departments, IUS-N provides the government with a secure DSL connection to IUS-N's satellite Internet link, at no cost.

In 2003, the Government made a commitment to develop and expand vanilla production with the support of NZAID. Vanilla has grown wild in Niue for a long time. Despite the setback caused by the devastation of Cyclone Heta in early 2004, there was ongoing work on vanilla production. The expansion plan started with the employment of the unemployed or underemployed labour force to help clear land, plant supporting trees and plant vanilla vines. The approach to accessing land includes planning to have each household plant a small plot of around half to 1-acre (4,000 m2) to be cleared and planted with vanilla vines. There are a lot of planting materials for supporting trees to meet demand for the expansion of vanilla plantations, however there is a severe shortage of vanilla vines for planting stock. There is of course the existing vanilla vines, but cutting them for planting stock will reduce or stop the vanilla from producing beans. At the moment, the focus is in the areas of harvesting and marketing.

Niue's economy suffered from the devastating tropical Cyclone Heta on 4 January 2004. The Niue Integrated Strategic Plan (NISP) is the national development plan, setting national priorities for development. Cyclone Heta took away about two years from the implementation of the NISP, while national efforts concentrate on the recovery efforts. In 2008, Niue had yet to fully recover from the devastation of Cyclone Heta.

In the area of trade, Niue is currently in the process of negotiating with other Pacific countries free trade agreements, PICTA Trade in Services (PICTA TIS), Economic Partnership Agreements with the European Union, and PACER Plus with Australia and New Zealand. The Office of the Chief Trade Adviser (OCTA) has already been set up to assist Niue and other Pacific countries in the negotiation of the PACER Plus.

Niue uses the New Zealand dollar.