Business Opportunities in The Marshall Islands

The RMI is a mixed parliamentary-presidential democracy in free association with the US. As a result of the Compact of Free Association, the RMI and United States have a close affinity on many issues of security, foreign policy, and climate change. US assistance and lease payments for the Kwajalein Atoll military base are the mainstays of RMI’s GDP. Since 2004, the US has provided over $800 million in direct assistance, subsidies, and financial support to the RMI, equivalent to approximately 70% of the country’s total GDP during that period. The Compact will run until 2024, after which funding will cease. A Compact Trust Fund (CTF) has been set up to provide economic security after the Compact ends. The RMI government forecasts 2.2% GDP growth in 2014, followed by .5% and 1.1% in 2015 and 2016, respectively. The main drivers of growth in 2012 were increases in copra, fisheries, and education. The most important commercial crops are coconuts, breadfruit. Industry is limited to handicrafts, tuna processing, and copra. Gross imports for 2012 totaled $125.6 million. With gross exports at $59.1 million, the 2012 trade deficit was $66.5 million. External debt totaled $100 million in 2012, or 56% of GDP. Although the external debt situation has improved since the Compact was amended in 2004, debt servicing, which is funded out of the government’s discretionary resources, has risen to 19% of general fund revenues because grace periods of prior loans have expired. In 2013 FDI was US$4.1 million (4% GDP), in line with average FDI levels from 2004 to 2013, excluding the purchase of the purse seiner vessels in 2010, which increased FDI to US37.1 million. Foreign direct investments are concentrated in the fisheries sector, including a tuna loining plant, a tuna processing plant, and several fishing purse seiners, the majority of which are owned by investors from China and Taiwan. Boutique tourism has recently become a factor as well, with elite surfing and diving operations making some significant expenditures in 2013 and 2014.