Dominica - Overview of economy

Dominica is the poorest and least developed of the Windward Islands. Its economy is mainly dependent on agricultural exports, especially bananas. The island's exceptionally mountainous landscape prohibits much cultivation. The island is also vulnerable to hurricanes. Even so, agriculture is the main source of employment and income revenue, and remains much more important to Dominica than to other Caribbean islands. As a result, the threatened removal of preferential access for Dominican banana exports into the European market is potentially disastrous for the island's economy.

Tourism has been slower to develop in Dominica than elsewhere, largely because the island has few white

sand beaches (the most popular type of beach) and has no international airport. Since the 1990s, however, it has developed a reputation as an " eco-tourism " destination, capitalizing on its spectacular natural beauty and wealth of plants and wildlife. The government has also sought to increase the numbers of cruise-ship visitors, and this sector of the tourism industry has grown substantially since the mid-1990s. The problem remains of balancing the need for increased tourism with protection of the island's unique and vulnerable eco-system.

Manufacturing is not developed in Dominica, but it is able to take advantage of locally generated hydro-electricity. The most successful venture is a large soap production facility, controlled by the U.S. Colgate-Palmolive corporation, which exports soap manufactured from local coconuts. This, together with other agricultural-processing activities, faces stiff competition from other Caribbean manufacturers. There is relatively little manufacturing aimed at the U.S. export market, as Dominica's limited infrastructure is unsuitable for large volumes of exports.

In an attempt to reduce dependency on banana exports, Dominica's government has tried to establish the island as an offshore financial center, offering tax-exempt status to banks, insurance companies, and other International Business Companies (IBCs). So far, a small number of IBCs have established themselves on the island. Of concern to critics of the system is the availability of "economic citizenship" to investors, which enables foreign residents to acquire a Dominican passport in return for a minimum investment in the island. The U.S. State Department has expressed concerns about money laundering and other illegal activity in connection with this initiative.

Despite attempts to broaden its economic base, Dominica remains critically dependent on agricultural exports and especially on the threatened banana trade. The resulting uncertainty from this trade has fueled migration since the mid-1990s and led to a decline in production and exports. Rural poverty is a large problem, and economic growth has faltered in recent years due to the banana crisis and natural disasters.