Economic Landscape in New Caledonia
New Caledonia has managed to keep their COVID19 cases to just 26, with all cases detected in quarantine and no community transmission recorded. With restrictions lifted and the country open, with the exemption of international tourism, the economy is looking to bounce back.
New Caledonia has a population of a little over 285,000 as of 2020. Although in the past five years since the last census, the French territory has recorded a negative net immigration rate of almost 10,000 people. However, despite their small size, they have one of the highest levels of GDP in the Pacific, behind only Australia and New Zealand. New Caledonia’s principal import countries include France, Singapore, China and Australia, with their main export sources being China, South Korea and Japan. The public sector accounts for over 18% of GDP, which has seen a decline of 5% in the past 10 years. France also contributes to the economy by providing $1.5 billion AUD per annum in financial transfers, equating to 14% of GDP.
Due to COVID-19, GDP is predicted to shrink by 3.6%, although it is estimated to decrease anywhere between 2.9% and 4.5%. Businesses in New Caledonia have been supported by a fiscal stimulus of $66 million USD to assist their operations. The Chamber of Commerce and Industry is also providing support to local SME’s to allow them access to training and development. The real estate sector has also contracted, with Nouméa recording a 24% fall in sales, but prices have fallen by only 1.6%. The recent adoption of the supplementary budget has also supported a loan to the value of $28.6 billion CFP ($282.2 million USD), to be provided by the French Development Agency and guaranteed by the state. Prior to the pandemic, the unemployment rate had fallen from 11.9% to 10.9%, with youth unemployment sitting at 26.5%.
The border closure banning all cruise ships and international air travel is currently in place until March 2021. A small number of repatriate and cargo flights continue to operate. Compared to other Pacific Islands such as Fiji and French Polynesia, New Caledonia is not as heavily reliant on tourism, although it is still an important sector. In 2019, New Caledonia recorded an increase of 8.4% in tourist arrivals, totalling 130,457 people. The number of cruise passengers visiting dropped to 343,962, accounting for a negative 24% decrease, mainly due to Carnival changing their fleet capacity.
Photo by Nick Sarvari on Unsplash
The economy is driven by a strong mining sector, with the island home to around 10% of the earth’s nickel resources. Some estimates suggest this is as high as 25%. Their laterite deposits have some of the highest levels of nickel contents, which is used for the development of batteries. New Caledonia is one of the top five nickel producers around the world, with the majority of exports going to Asia. The industry equates to 90% of New Caledonia’s exports and is a large employer, with 1 in 5 jobs related to mining. With over 7 million tonnes of nickel, the mineral accounts for up to 10% of their GDP.
However, the largest mine in New Caledonia, the Goro site, is currently in the process of transfer with 3000 local jobs at risk, if a new buyer cannot be found. The sale of the 95% Brazilian owned-Vale nickel plant recently fell through when the Australian company New Century Resources withdrew their offer. As new bidders come forward, the government of the South Province is working with interested parties to prevent a collapse of the New Caledonian economy.
A high reliance on mining means New Caledonia is looking towards new sectors to diversify the economy. As of 2018, New Caledonia had over 60,000 registered companies operating across various industries. This includes 70% of businesses in the services sector such as trade, transport, real estate, education and health, 18% in industry and construction, with 12% in agriculture. The Industry Federation in New Caledonia has called for a fundamental restructure that places a greater focus on domestic production.
Currently, the Government of New Caledonia has created several initiatives to help drive development and economic growth across new and emerging markets. This includes projects such as Choose New Caledonia to attract international businesses, creation of an investment office within the government, a roadmap for economic expansion in the Loyalty Islands, a digital committee to respond to technology changes, as well as free trade zones and tax exemptions for research and innovation initiatives. An open data platform has also been formed to promote more transparency on topics of importance, such as the economy and industry.
David Guyenne, the President of the New Caledonian Chamber of Commerce and Industry, said the island must highlight its unique offerings, “New Caledonia can only survive through its local strong endogenous ecosystem and through its specific comparative advantages: biodiversity, marine biodiversity, niche eco-friendly tourism, skilled labour and advanced infrastructures.” Mr Guyenne also recognised the important role of technology and digitalisation, “All will need transforming to e-administration, e-learning, e-health, e-commerce, e-industries,” he said.
New Caledonia is aiming to increase renewable energy production to new levels, with the aim of 130 megawatts of production by 2025. The mining industry is also looking to innovate their practices through automation and technology-led initiatives to protect New Caledonia’s biodiversity. Other businesses in the private sector are leading a diversification push by tapping into niche markets, including the export of blue shrimp to Asia.
The territory is looking to be innovative and forward-thinking in an effort to attract more investment into the region and lift its economic profile. Although, this may be hindered in the near future by low business confidence due to the pandemic, as well as the uncertainty surrounding New Caledonia’s future political situation and relationship with France.