Climate Change Impact and Structural Reforms in Kiribati
KIRIBATI
products, mainly tuna fishery and copra, and a small number of export markets—an obstacle to its
development. On top of that, capacity constraints and significant delays in some of the ongoing
projects due to COVID-19 further complicate Kiribati's development and growth path.
16.
To be successful, Kiribati will need to create opportunities for both horizontal and
vertical diversification. Despite the difficulties-notably its remote location from potential export
markets, a lack of natural resources (mainly fishing and copra), steep learning curves and
competition (e.g., in tourism), and infrastructural constraints (slow internet connectivity for ICT
services, a small population and a shortage of skilled workers), opportunities exist. Some options,
outlined in the past IMF Article IV staff reports, include upgrading copra production (to higher
value-added products), expanding tuna processing (processing and packaging tuna, instead of just
selling tuna catch in foreign markets), and expanding the ICT and tourism sectors. Opportunities may
also exist in niche agriculture (e.g., fruit commodities for snack foods and juices). Some industries,
such as deep-sea mining-seeking to retrieve high-value polymetallic nodules from the seabed for
use in energy transition projects—are promising but require in-depth cost-benefit analysis to assess
the economic benefits versus the environmental costs from pollution, destruction of fishery habitats,
loss of species, and noise pollution, among other things. Most of all, upgrading basic infrastructure
such as transportation, electricity, water, and internet will be crucial to facilitate improvement in
economic activities and diversification.
Kiribati's exports are mainly in fisheries...
Figure 4. Kiribati: Economic Diversification
1. Kiribati 2019 Export Structure (in %)
ICT
Frozen fish,
excluding fillets
Fish fillets
and exports are concentrated in East Asia
2. Main Export Destinations in 2019
Thailand
Philippines
South
Korea
13.42%
Travel and Transport
tourism
3.39%
2.43%
Insurance and
finance
62.39%
5.23%
Coconut &
palm kernel
Live
Fish
Kiribati's exports diversification options are limited amid a
high distance from existing capabilities...
3. Complexity and Distance to Capabilities
7
-8
ECI (HS 2019): -0.70
Q
4.10%
...
53.59%
3.54%
16.88%
Japan
9.44%
China
Malaysia
8.89%
with limited scope for opportunity gains
4. Opportunity Gains and Distance to Capability
0.008
0.006
0.004
0.002
ECI (HS 2019): 0.00
0
-0.002
-0.004
-0.006
-0.008
-0.012
Distance
-0.014
-0.016
-0.018
Distance
Source: IMF Staff calculation based on UN Comtrade, Harvard Growth Lab.
Notes: In panel 3, lower distance to existing capabilities (close to 0) signifies a product is "nearby" to existing knowhow. More complex
products tend to support higher wages. In panel 4, larger opportunity gain for future diversification (higher values) holds more linkages to
other high-complexity products, opening more opportunities for continued diversification. Research finds that countries tend to diversify
by moving into nearby and related products or into those that require similar knowhow to build on existing capabilities.
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