Economy of the Falkland Islands

One-pound coin of the Falkland Islands pound
Currency	Falkland pound
Fixed exchange rates	1 Falkland pound = 100 pence[1]
Fiscal year	1 April–31 March
Trade organisations	N/A
Statistics
GDP	$105,100,000 (2002 est.) Rank: 219[2]
GDP growth	N/A
GDP per capita	PPP: $35,400 (2002 est.)
GDP by sector	agriculture (NA%), Industry (NA%), Services (NA%)
Inflation (CPI)	3.6% (1998)
Population below poverty line	N/A
Labour force	1,724
Labour force by occupation	agriculture 95% (mostly sheepherding and fishing)
Unemployment	full employment; labour shortage
Main industries	fish and wool processing; tourism
External
Exports	wool, hides, meat, squid $125 million (2004 est.)
Main export partners	Spain 77.4%, UK 9.4%, US 4.9% (2004)
Imports	fuel, food and drink, building materials, clothing; $90 million (2004 est.)
Main import partners	UK 63.2%, Spain 30.3%, France 3.6% (2004)
Public finances
Government debt	N/A
Revenues	$66.2 million
Expenses	$67.9 million (FY97/98 est.)
Economic aid	$0 (1997 est.)
All values, unless otherwise stated, are in US dollars.

The economy of the Falkland Islands, previously heavily over-dependent on sheep farming (and historically whaling), has become more diversified in the last decades and now also has income from tourism and commercial fishing as well as a service base for the fishing industry. The Falkland Islands have the highest standard of living in South America. The islands use the Falkland pound which is on par with the Pound Sterling.

Historical development

During the 19th century, the supply and maintenance depot for ships at Stanley developed into a port serving ships rounding Cape Horn. There was also trade in cow hides from the wild descendants of cattle introduced by French settlers in the late 18th century. Sheep farming was then introduced, taking over from the cattle trade in the 1870s and becoming self-supporting by 1885. The islands also provided a base for whaling and sealing, with factories being built on East Falkland and South Georgia, but these industries ended, leaving the wool trade as the mainstay of the islands' economy.

By the 1980s, the economic viability of the islands was in doubt, but in the aftermath of the Falklands War there was a new commitment from the United Kingdom government. The Falkland Islands Development Corporation was formed in mid 1984 and in its annual report at the end of that year it set out to increase employment opportunities by encouraging diversification, to increase population levels through selective immigration, to aim for long-term self-sufficiency and to improve community facilities. To achieve this, the Corporation identified agricultural improvements, tourism, self-sufficiency in energy, development of the industrial and service sector, fisheries, and land subdivision as areas to tackle.

By April 2002, the Guardian reported, the Falklands' economy was booming, with income from tourism and the sale of squid fishing licences as well as from indigenous fishing companies with locally registered boats. Fishing boats visit the islands from Spain, Korea, Taiwan and Japan, and obtain supplies and services from the islands. An agreement with Argentina set the terms for exploitation of offshore resources, though hopes of oil production have yet to materialise. In September 2009 Desire Petroleum announced they had secured the Ocean Guardian to drill a number of exploratory wells in the North Falklands Basin^[3]. Drilling is due to commence in February 2010 on acreages operated by Desire Petroleum and Rockhopper Exploration. An islander told the BBC that "we were the luckiest people that was ever mixed up in a war."

Tourist interest was stirred by the publicity given to the islands, and as well as introducing holiday facilities and guided tours, the islands became a regular port of call for the growing market of cruise ships, giving visitors a glimpse of what the islanders had previously thought of as their humdrum existence, as well as tours to see the scenery and wildlife, particularly penguins, seabirds, seals and sealions, and to visit battlefields. However, diplomatic disputes with Argentina caused a slight disruption in 2004, when charter flights from Chile to serve cruise ships were refused permission to fly over Argentina to reach the islands. Large numbers of 19th century shipwrecks around the islands are an attraction for recreational divers, and trout fishing, golf, horse riding and sailing are also on offer.

Economic overview

The Falkland Islands have a GDP of $105 million, and a per capita GDP of $35,400 (2002 estimate) placing the islands on a par with the United Kingdom (GDP per capita of $35,200 – 2009 estimate).^[2] The contributors to the GDP by sector (2010 forecast) are:^[4]

• Fisheries – 52.5%
• Government (including health and education) – 14.0%
• Communications, Finance and Business services – 11.4%
• Hospitality & Transport – 7.7%
• Construction – 6.6%
• Housing and other services – 3.2%
• Mining. Quarrying & Manufacturing – 2.1%
• Agriculture – 1.6%
• Utilities – 0.9%

In the 2009/10 financial year, the government revenue was £42.4 million of which £14.5 million came from fishery licences and services and £10.5 million from taxes. During the same period the government expenditure was £47.6 million.^[5]

Other economic indicators include:^[2]

Electricity - production: (2003) 22.23 million kWh

Electricity - production by source: (1998)

• fossil fuel: 70%
• wind: 30%

Electricity - consumption: (2003) 20.68 million kWh

Overview from CIA Factbook

The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987 the government began selling fishing licenses to foreign travelers operating within the Falklands exclusive fishing zone. These license fees total more than $40 million per year, which goes to support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Exports feature shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defence. The British Geological Survey announced a 200 nautical mile (370 km) oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.

Industries: fish and wool processing; tourism

Agriculture - products: fodder and vegetable crops; sheep, dairy products

Agriculture

Farmland accounts for a little over 80% of the Falklands land area.^[6] Sheep farming was formerly the main source of income for the islands and still plays an important part with high quality wool exports going to the UK:^[2] according to the Falklands Government Statistics there are over 500,000 sheep on the islands. Roughly 40% of the national flock are on West Falkland and 60% on East Falkland.^[6] The base flock are Corriedale and Polwarth breeds with Dohne Merino, South African Meat Merinos, Afrinos and other breeds having been introduced to improve the fineness of wool and meat characteristics. ^[7] The wool price suffered a slump in 2005/6 and a peak in 2008. Since 2003 the relative premium commanded by higher quality wool has increased with coarser wool missing out on the high prices in 2008. A summary of the prices for the period 2002 to 2010, which are often dictated by Australian exchange rate and weather conditions^[8] is shown below: ^[9]

Although the production of wool is spread across all the islands, the breeding of animals for slaughter is concentrated on East Falkland where the EU accredited Send Bay abattoir is situated.^[10]

Selected statistics for the year 2008/9 relating to sheep farming are given below:

There are also a small number of cows, pigs and horses on the islands that are reared for local use.^[6]

See also

• Falkland Islands Holdings

References

External links

• Falkland Islands Development Corporation - Annual Report 1984
• A Visitor's View of the Falkland Islands
• Guardian Unlimited - Special Reports - Share the Falklands
• Four Seasons and more than 3,000 Tourists in One Day
• "Falklands Experience" tours
• Falklandsinfo: Welcome to our Spectacular Islands!
• Britain sends minister to resolve Falklands air row with Argentina
• Guardian Unlimited - Special Reports - The Falklands' rise to riches