Summary

Solomon Islands is endowed with natural resources that, if ethically managed, would be capable of contributing significantly to its economic development. These include fisheries, mineral deposits (gold, nickel, and bauxite), agricultural products (copra, palm oil, and cocoa), and a natural environment which is attractive to tourists.

However, tapping into these natural resources and realising Solomon Islands’ economic potential is a challenge. Solomon Islands is one of the hardest countries in the Pacific, and the world, to do business with. In 2020, it was ranked 136 out of 190 countries in the World Bank’s Doing Business rankings.

Economy and GDP

The majority of the population is involved in subsistence/cash crop agriculture, with less than 10% of the population involved in formal paid work. Exports remain commodities-based and include timber (pdf), fish (pdf), cocoa, copra, and palm oil.

Economics was a pillar under the Regional Assistance Mission to Solomon Islands, with the aim of stability and economic growth. However, as the economy grew, so did domination of Asian businesses in retail, extractive industries, construction, and other key sectors. This has created tensions between those businesses and Solomon Islander businesses which can no longer afford to rent shopfronts or access those key sectors.

Climate change and extractive industries are changing islands, sometimes irreversibly, which is worsening Solomon Islands’ economic outlook.

Up to date information on Solomon Islands’ economy can be found at the Central Bank of Solomon Islands website.

In 2018, Solomon Islands was recommended by the UN’s Committee for Development Policy to graduate from the Least Developed Country (LDC) category status by 2024. This recommendation was based on Solomon Islands having met two out of three LDC graduation criteria on two consecutive triennial assessments. These were the Gross National Income per Capita which measures income status and the overall level of resources available to a country, and Human Asset Index which measures health and education outcomes.

The other criteria which Solomon Islands did not meet is the Economic and Environmental Vulnerability Index which measures factors like remoteness, dependence on a narrow economic base, and vulnerability to natural disasters.

The country was not ready for graduation in 2024, as it lost three critical years to the COVID-19 global pandemic, the November 2021 civil unrest, and by multiple crises and two earthquakes between the years 2020-2022. Initiatives that will enable a sustainable graduation were not met.

In 2023, Solomon Islands requested that the United Nations delay its graduation to the year 2027 and this was approved, meaning Solomon Islands can continue to receive support commensurate with a nation in the LDC category.

There are inherent physical challenges tied to the country's status as a least developed nation. High infrastructure costs, poor national and international communication systems, and limited health services are persistent barriers to progress. This is worsened by corruption – Solomon Islands is ranked at 41 out of 100 on Transparency International’s Corruption Perceptions Index. This is a failing score. Bradley Tovosia, who serves as the Deputy Prime Minister and Minister of Mines, Energy and Rural Electrification, has long been accused of corruption, as has Minister of Finance and Treasury Manasseh Damukana Sogavare.

For further information on Solomon Islands’ Economy and GDP, see the resources below (a reminder, videos are available to view on your mobile devices or standalone laptops – not on the DPN):

Articles

1. Oxford Business Group interview with Prime Minister Manasseh Sogavare
2. New Sources of Growth and More Efficient Public Sector Essential for Solomon Islands Economy: World Bank
3. Solomon Islands Independent Commission Against Corruption is a ‘tiger that has no teeth to bite’ (In-depth Solomons)
4. The costs of logging in Solomon Islands (DevPolicy Blog)
5. Solomon Islands: The plunder of paradise by Asian logging companies (World Rainforest Movement)
6. Logging is corrupting these islands. One village fights back—and wins (National Geographic)
7. Timber Companies Suspended for Illegal Logging in the Solomon Islands (Earth Journalism Network)
8. Searching for Answers as Climate Change Ravages Solomon Islands' Bellona (Earth Journalism Network)
9. Solomon Island farmers moving away from traditional methods and using new techniques due to climate change (ABC)

Trade with Australia

Despite its proximity and people-to-people links, two-way goods and services trade between Solomon Islands and Australia is modest and has been declining over recent years.

In 2021, Solomon Islands exported AUD16 million to Australia and imported AUD91 million. Australia was Solomon Islands’ seventh largest export market in 2021 (2.5% of exports).

Foreign direct investment from Australia into Solomon Islands is small; AUD46 million in 2020, compared with AUD339 million from Solomon Islands into Australia.

Very few Australian companies have a presence in Solomon Islands. These include ANZ Bank, SolRice (a wholly owned subsidiary of SunRice), and Kokonut Pacific.

Australia is the largest private sector employer in Solomon Islands because of the Pacific Australia Labour Mobility scheme. Solomon Islanders in Australia send remittances to their family, which is a major source of financial support to the country.

Jobs, skills, and economic growth are at the centre of Australia’s partnership with Solomon Islands. Australian investments are building a skilled workforce to drive economic growth for Solomon Islands and equipping Solomon Islanders with essential skills to increase their participation in the workforce (for example through ‘TAFE-like’ training at the Australia Pacific Training Coalition).

Through Australia’s economic development program, Strongim Bisnis, Australia has funded equipment, marketing development, and more for local companies, with a special focus on women entrepreneurs, which has helped businesses grow and create more local jobs for Solomon Islanders.

For further information on Solomon Islands’ Trade with Australia, see the resources below:

Podcasts

1. Support for Dreamcast Theatre ahead of the 2023 Pacific Games (Australian High Commission in Solomon Islands G’day Solomon radio program, 12m18s)
2. Support for local business Islands’ Own, and the role of the Australia Pacific Training Coalition (Australian High Commission in Solomon Islands G’day Solomon radio program, 17m, 17s)
3. Support for local business MK Lokal (Australian High Commission in Solomon Islands G’day Solomon radio program, 14m15s)

Articles

1. Pacific labour mobility over the last year: continued growth (DevPolicy Blog)
2. Labour mobility in the Pacific: transformational and/or negligible? (DevPolicy Blog)
3. Pacific labour mobility growth: winners and losers (DevPolicy Blog)
4. Pacific Engagement Visa quotas need to be set strategically and selectively (DevPolicy Blog)
5. Reducing remittance costs in the Pacific Islands (The Lowy Institute)

Discussion questions

1. The UN’s Committee for Development Policy categorises Solomon Islands as a Least Developed Country, and Solomon Islands will continue to seek foreign development assistance from regional neighbours. Should Australia do more to assist Solomon Islands’ so that the country can develop economically? What part could the ADF play in this?
2. Given Solomon Islands’ small export base, should Australia raise the cap on Pacific Australia Labour Mobility scheme workers and make visas easier to obtain for Solomon Islanders?
3. Given the majority of the population is involved in subsistence/cash crop agriculture, what risk does climate change pose? What does this mean for Solomon Islands’ future economic outlook?