This paper examines the economic development of the Republic of Kiribati from the perspectives of the decline in the economy following independence in the late 1970s and the current role of foreign aid. As for the former perspective, there is particular interest in investigating the status of the different economic sectors and expenditures to provide a clear understanding of the reasons behind the collapse of the economy in the late 1970s. In regard to the latter perspective, the focus of the investigation is on the role of foreign aid in contributing to Kiribati’s GDP.
The main findings of the study indicate that the economic downturn in the late 1970s was possibly caused by the demise of the industrial sector. Colonialism is also worth mentioning given the fact that the United Kingdom – the colonizing country of Kiribati – was utilizing Kiribati’s natural resources and controlled its industrial mining activities until independence. It is also observed that following independence in 1979 the GDP of Kiribati also dramatically declined. Although the foreign aid received over the last three decades has reached half a billion US dollars while accounting for more than 70 percent of GDP in 2011, this study finds that the contribution of foreign aid to GDP is uncertain.

TABLE OF CONTENTS




ABSTRACT i
ACKNOWLEDGEMENTS ii
CHAPTER 1: INTRODUCTION 1
CHAPTER 2: LITERATURE REVIEW AND COUNTRY DETAILS 4
2.1 Literature Review 4
2.2 Country Details 8
CHAPTER 3: THE FALL IN GDP IN THE 1970s 11
3.1 The history of the colonial era and economic activities in the colony 11
3.2 Decomposition of GDP: Industry, Agriculture and Services sectors 14
3.3 GDP on the Expenditure side 17
3.4 Discussion........................................................................................................................... 21

CHAPTER 4: THE ROLE OF FOREIGN AID 23
4.1 Definition of Foreign aid 23
4.2 Background of Foreign aid in Kiribati 24
4.3 Foreign aid policies 25
4.4 Trends and Composition 27
4.5 Aid (by type of usage) to Total aid ratios 32
4.6 Foreign aid and GDP 35
4.7 Aid flows and the Donors’ business cycles 38
CHAPTER 5: CONCLUDING SUMMARY AND POLICY IMPLICATIONS 42
APPENDIX 44
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