Openness and growth of Fijian economy

Since small economies are not in a favourable position compared to the relatively large economies in the world market when it comes to benefits from trade, the issues of trade openness and its impacts on economic growth has been of critical importance to small and open economies. The paper provides an analysis of the Fijian economy and finds that the degree of its openness, both in absolute and relative terms, is seen to be on the rise during 1970-2009. Even though the net trade balance has moved against the country from early 1990sour econometric results finds a positive and significant impact of openness on the GNP growth. The openness has mainly boosted up the service activities (led by trading and tourism sectors) while industrial and construction sectors have not grown much. The intra-industry trade share for fifteen product groups, at aggregate level, is found to be declining during 1980-2009. Although the share is quite high for agriculture and mining activities it is abnormally low for non-agriculture, except for clothing. Therefore, Fiji predominantly relies on comparative advantages of traditional sector for favourable trade balance. This is risky and the county needs to pursue the integration policies for the expansion of industrial base in the economy and its result growth.