Economic: Gabal

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Economic Overview

Throughout most of the 20th Century, the economy of Gabal predominantly focused first on timber logging and then chromite mining, with the export of Molave lumber and chromium providing the nation’s only income, apart from overseas investment. Industrial focus gradually shifted towards chromite mining, as forests were clear-cut. Revenues obtained from the exportation of these products, combined with a relatively small population, made Gabal one of the wealthiest nations in the world in terms of gross domestic product per capita. In the latter part of the 20th century, mining produced about 2 million tons of high-grade chromite each year. Once these reserves were exhausted, however, the economy collapsed, and Gabal has since struggled to recover. The Gabal government first attempted to become an offshore banking center—essentially, the Pacific equivalent to Caribbean offshore banking. Allegations of money laundering and transnational criminal connections, however, resulted in the entire Gabal banking sector closing. This forced Gabal to seek alternate revenue streams. A twenty-year span of excessive spending and bad investments led to the economic classification of the nation as a fragile state. The Gabal government invested initial surpluses of $1.05 billion from the timber and chromite industries to provide income when the resources ran out. By law, the government could not access these funds for 15 years, at which time the expected value would be over $4 trillion. An audit of the Gabal Royalties Trust Fund recently revealed that 85% of that investment was lost through corruption and bad investments. Meanwhile, signs of past prosperity are all over the islands—unmaintained cars left to rust, restaurants in disrepair or closed. Gabalians who formerly had no worries about importing luxurious food or clothing now live on about $80 a week.

Gabal has a mixed market economy. A predominantly free market economy exists at the local level, but the state centrally directs most of the national and international economic decisions. This is especially noticeable in the state-owned fishing and tourism enterprises that make up a significant portion of the economy. Combined, these enterprises contribute half of the GDP and a third of employment. However, governance of these enterprises is inconsistent and rife with tribal cronyism.

The diversification of the Gabal’s economy following the banking experiment debacle resulted in two surges to the Gabal economy. First, Gabal refocused on exploiting natural resources. This included surveying the islands for secondary deposits of chromite and issuing licenses to fish in its territorial waters to international conglomerates. With improved regional coordination and strong global market conditions, fisheries revenue has more than tripled in the last five years and now accounts for about 30% of domestic revenue. By contrast, chromite mining became an increasingly marginal source of income, primary deposits were depleted, and deep mining of secondary deposits has yet to begin, due to uncertainty regarding both quantity and location in tribally protected lands. Second, Gabal saw some success expanding its tourism sector, marketing itself as a premier dive destination, due to the number of WWII shipwrecks offshore. Combined with economic diversification and boosted by strong aid flows, these actions returned the Gabalian economy to growth, expanding by as much as 17.3% per year for the last five years. While there has been a significant improvement in the country’s overall economy, economic growth remains erratic and the issues of inequality and distribution of wealth remain an ongoing concern.

Efforts to switch to a more efficient economy, particularly one tied to tourism, have met with mixed results, in large part due to tradition and tribalism. Additionally, unemployment and poverty, along with a wide income equality gap create friction points among the populace. Although historically tied to and reliant on Western or Western-leaning nations, there is also animosity over past exploitation. The ability to expand on what resources it has available will steer future policy decisions. Gabal will continue to seek diversification of its economy in the long term, while relying on international aid, regardless of source, over the short term. South Torbia, in particular, will seek to protect and expand its trade with Gabal by providing aid and other support. Despite the government being moved from Puerto Princesa on Palawan Island, to Coron, Puerto Princesa continues to be the nation’s economic hub.

Economic Activity

The microstate economic structure of Gabal and lack of diversified natural resources means that Gabal suffers from a very volatile growth rate. Even with efforts to expand revenue sources, growth over the last ten years ranged from an annual high of 36.5% to a low of -20.0%. Periods of recovery reflect progress in restoring chromite exports, expansion of fishing, and growth in services. A high decline in GDP, however, resulted from a 2013 suspension of mining and decline in tourism following storm damage to the nation's infrastructure from Super Typhoon Haiyan. Although mining depleted the primary reserves of chromite, ongoing efforts seek to extract a deeper layer. These secondary deposits may last another 30 years. Often, the amount of international aid Gabal receives directly affects economic growth. This aid, in turn, varies based on the political climate within either Gabal or the donating nations.  

Economic Actors

As the country relies heavily on international aid and development, the beneficiaries of these resources tend to hold a greater level of economic sway. This means that the two areas of greatest potential economic growth—tourism and fishing—are continually battling for investment dollars. Linkages with private investors, such as Williams Finance Group in the US, Donovia’s Auzan Venture Company, and Asker International from Central Asia, often have the greatest return, completely bypassing official channels. 

Concerning charity, the Gabal Association of Non-Governmental Organizations (GANGO) acts as a quasi-umbrella organization covering all NGOs in the country. GANGO focuses its efforts into three areas of income growth and employment: aquaculture (grouper farming), youth development (skills training programs for young adults), and women in development (agricultural projects focused on female employment).  

Political parties have very little socioeconomic impact on the average Gabalian, as family, clan, and religion tend to have far more influence. From an economic standpoint, the average islander has little trust in the government, as political leaders have continually focused on the resource sector than on development of human capital.

International Trade

The Gabal Cooperative Society, a government agency, conducts most of the nation's retail trade. The country is almost completely dependent on imported goods. Gabal has few domestic resources and virtually all consumer products are imported.

Commercial Trade

Primary imports include foodstuffs, refined petroleum (diesel), prefabricated buildings, large construction vehicles, cars, and poultry meat. Importation occurs from Australia (56%), Olvana (7%), US (2%), EU (1%), OPEC Nations (0.5%), South Torbia (0.3%), Belesia (0.2%), rest of the Pacific Region (21%), and the rest of the world (12%). Exports are primarily chromite, and to a much lesser extent, scrap metal and garments. Exportation occurs mostly to Australia (47%), the EU (10%), US (2%), OPEC Nations (0.5%), South Torbia (0.5%), Olvana (0.3%), Belesia (0.2%), rest of the Pacific Region (36%) and the rest of the world (3.5%). Total value of Gabalian trade is $332.61 million in exports and $871.45 million in imports. 

Military Exports/Imports

Gabal does not have a significantly sized military nor any military hardware production capacity. As Gabal has not tailored its military towards conducting offensive nor defensive operations of any scale, importation of weapons is extremely limited, mainly periodic replacement of small arms. Gabal has no corporate involvement in the defense industry.

Manipulation/Weaponization of Economic Activity

Domestic dispersion of aid dollars is highly politicized and subject to tribal and other power player influence. Gabal is an accepting target of big power efforts to gain influence in the region—the West, Donovia, and Olvana in particular face off on a small, but noticeable scale.

Arctic Economic Strategy

The Government of Gabal does not have a direct economic strategy for the Arctic. Gabal desires to capitalize on the indirect economic benefits associated with the increased maritime traffic that is anticipated by having open Arctic shipping routes. Port development, increased access to energy imports, and improved Gabal tourism are the long term economic goals the Government of Gabal associates with the Arctic.   In lieu of having a domestic market capable of supporting their economic goals, Gabal’s economic policies attempt to make it an appealing option for foreign investment, often leading to lopsided agreements that provide favorable conditions to the foreign investor.

Economic Sectors

The current business environment in Gabal is one of stability with little expected shift, either positive or negative, in practices or demographics. Like GDP, the labor force is predominantly in the services sector (78.7%), nearly equally split between the tourism industry and government work. The industrial sector employs 15.3% of the work force, almost exclusively in chromite mining, while 6.0% of the population works in agriculture. Gabal does not have a national stock exchange. 

Raw Materials Sector

Agriculture

The only commercially viable fertile areas on the islands are primarily in the lowlands of Culion Island, where rice, corn, and sugarcane are grown. Commercial and subsistence farming combined are insufficient to meet domestic demand, and the nation must import a significant quantity of foodstuffs. The combination of slash-and-burn agricultural processes and continuous mining of chromite left many portions of the islands unsuitable for farming. Mining contamination and nutrient depletion from destructive farming practices made large portions of available arable land sub-optimal for agricultural productivity at anything above the subsistence level. The government is attempting to address these issues. The Agriculture Development Fund of Gabal provides a mechanism for small grants and micro-credit for the development of commercial and agricultural activities in the country, intended to encourage alternate farming methods. For example, a poultry farm started operation last year with a budget of $18,200, produced total sales of $127,750. These efforts pale in comparison to the needs of either the economy or the nation’s populace, however.

Forestry

At one time, Busuanga held a significant number of Molave forests, but the government harvested the remaining stands for export immediately following World War II. While portions of the islands remain forested, none is suitable for commercial timber operations. The government is attempting to re-grow its rain forests for both commercial and ecological reasons. Rain Forests within Gabal are now protecting against logging activity.

Fishing

While the islands possess multiple bays, harbors, anchorages, and lagoons, none is large or deep enough for a port capable of deep-water operations. The government hoped to develop a local fishing industry, and formed the Gabal Fishing Corporation forty years ago. The fishing industry, however, remains a relatively insignificant portion of GDP, with sales of fishing rights garnering more cash value than domestic fish produced. Since the nation does not have the resources to develop a viable fishing fleet, the government instead opted to sell its fishing rights to other nations. Revenue from fishing licenses presents some challenges, as revenues can be difficult to predict from year to year. The ability to sustain revenues at reasonable levels in the long run depends on factors such as global market conditions and the continued success of regional fishery cooperation. The domestic fishing industry consists mainly of trolling for tuna with small outboard-powered boats.

Oil and Natural Gas Extraction

Gabal has no proven reserves of oil, natural gas, or coal, nor does it possess any refining capacity.

Mining

With the exception of Coron Island, industrial pollution contaminates much of the inland water. The only economically significant natural resources remaining are chromite and fish, particularly tuna. Earnings from the export of chromium remain an important potential source of income as recently prospectors discovered deeper secondary chromite reserves. However, the extraction of these reserves requires considerable investment. The rehabilitation of mined land and the replacement of income from the chromite and timber industries are serious long-term problems. Combining uncertain fishing revenues with reliance on chromite market prices, the government of Gabal must carefully manage additional revenues given their finite and uncertain nature. All chromite mining is under the purview of the Gabal Chromium Corporation, a statutory corporation responsible to the Prime Minister in his capacity as minister for island development and industry.

Manufacturing and Industry Sector

The only industries on Gabal are related to chromite mining and fishing. High-grade timber and chromite ore were the only notable natural resources of Gabal, its only export commodities, and the basis of the Gabal economy. The Gabal Chromium Corporation, who quickly bought out the logging industry once surveyors discovered the extent of chromite on the island, was the nation's primary producer, employer, and exporter. During the heyday of chromite mining, Gabal also had refining capability to produce high-carbon ferrochromium. However, with the reduction of raw ore mining and concerns over carbon monoxide production, the Gabal Chromium Corporation now ships all ore off island for processing. Beyond this, Gabal does not possess any indigenous manufacturing capability.

Energy Industry

Gabal imports 100% of its energy needs. It has no exploitable oil, natural gas, or coal reserves. The government desires to transition to solar power in order to reduce the burden on the state budget as well as household finances.

Chemical Industry

Gabal has placed severe limitations on any expansion by a potential domestic chemical sector. The ability to dispose properly of liquid, chemical and hazardous wastes is limited by the high costs of waste treatment for isolated populations. The government is extremely concerned by the high levels of pollutants already extant, and has no desire to see an increase, even if it could potentially bring economic growth.

Other Major Industry

There are currently no other major industries in Gabal.

Services

Although services are the largest segment of the Gabal economy, in terms of both contribution to GDP and percentage of labor force, the sector remains vastly underdeveloped. Almost half of the service sector is comprised of government workers in what is mostly a bloated, unproductive bureaucracy. Approximately 45% belong to a growing tourism sector, which has the potential for growth, but suffers from marketing and investment challenges. The remainder of the service sector is a disparate mix of media, transportation, and health care.

Baking/Finance

The banking and finance industry in Gabal is immature and unsophisticated. The informal savings and credit market in Gabal consists mainly of relatively localized credit and savings transactions of money, real goods, and labor services among members of extended families, clans and tribes, friends and relatives and trade store owners. In addition, informal savings and credit groups generally found among rural women extend credit. An emerging source of credit in Coron is the semi-professional moneylender. Although such moneylenders do not yet appear to be operating outside the Capital, there is evidence of a growing class of semi-professional moneylenders who combine moneylending with their usual occupational activities in the urban sector. These urban moneylenders provide very short-term loans, mainly for persons whom they know well. Often, this form of financial intermediation is the only financing available to the majority of Gabalians. Even in locations in which deposit and transaction services are available, many formal financial institutions do not provide credit services to lower income households, who must borrow from informal sources.

Information Communications Technology (ICT)

The communications industry within Gabal is severely underdeveloped. Communications technology is imported primarily from South Torbia and Olvana. Businesses and government departments rely on contracted resources from these countries to set up and manage communication systems. Younger Gabalians, trained in South Torbia and Olvana, are beginning to provide some these services, but usually as part of international corporations.

Professional Services

Professional services are usually contracted through international corporations. These companies are beginning to hire a larger number of internationally trained Gabalians, but Gabala does not currently have the capacity to support these services domestically.

Tourism

Tourism holds the greatest promise for growth, but suffers from inconsistent government policies, growing environmental opposition to development, natural disasters, and overall poor management.  Gabal has several informal but influential non-party political organizations impacting tourism. The most prominent are conservation-related: Green Gabal and The Island. Both of these organizations lobby for greater ecological awareness in Gabal and for greater involvement in the international green movement. A pro-tourist organization, the Gabal Tourism Chamber, has also gained considerable influence over the last several years. Acting essentially as an advocate for Gabal's merchant class, the Tourism Chamber seeks to expand tourism in Gabal. This has occasionally put them into conflict with the ecological groups, as tourist businesses lobby for greater access to protected wildlife preservations and areas of the ocean.

Government Services

Government services are dependent on aid resources and domestic revenue. Gabal is a small and poor country with few natural resources. It depends, in large measure, on the patronage of past colonial power patronage and tourism. Both of these main sources of revenue are subject to variables beyond the control of the Gabal government. As such, revenue may be inconsistent from year to year, causing disruptions in its capacity to employ and pay workers. A large and bloated bureaucracy creates inefficiencies, corruption, and poor service delivery.

Participation in the Global Financial System

World Economic Organizations

Gabal is highly dependent on foreign aid. Last year, Gabal received $205 million in net total Official Developmental Aid. Western nations provided budgetary support in decreasing amounts since independence, phasing it out completely some 15 years ago in favor of project development investment. Gabal’s economic growth heavily relies on commodity exports. Despite its enclave nature, the mining sector has a major impact on the Gabal economy, through its contribution to foreign exchange and government revenue. After four decades of independence, the future leaders of Gabal face both optimism and pessimism. A growing middle class produced a number of talented emerging leaders committed to changing the weak development trajectory of their country. They face a complex set of challenges: weak governance, a failing health system, a mediocre national education system, continuing reliance on the extractives industry, and the unrealized potential of subsistence agriculture.

International Monetary Fund (IMF)

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. The past fiscal year’s Article IV consultation with the government of Gabal included the following summary, “Economic activity slowed sharply due to lower government spending, tighter domestic financial conditions, weak sentiment, and the global deceleration. The slowdown followed several years of relatively strong growth, boosted by reconstruction spending after a major cyclone four years ago, which resulted in rising external and fiscal imbalances. Fiscal space is now at risk and external vulnerabilities remain significant. Gabal has large investment needs to strengthen resilience to natural disasters and climate change. Policies should aim to increase Gabal’s resilience to shocks and strengthen growth performance. Faster fiscal consolidation is needed to rebuild fiscal space and support external stability. Improving the business environment and governance will raise potential growth by mobilizing private investment, enhancing productivity, and diversifying the economy.”

World Bank

Last year, Gabal became the 189th country to join the World Bank Group, making the nation eligible for financial support from World Bank-administered trust funds. The World Bank has thus far disbursed approximately $10 million to Gabal for improvements to agriculture, fishing, and forestry.

International Development Aid

The government of South Torbia gave $140 million in international aid—equal to nearly 40% of the $350 million GDP in Gabal. For the last two decades, Gabal borrowed money as part of its post-chromite diversification strategy. Gabal has been mostly a Western-leaning nation in terms of trade and support. Last year, the Government of South Torbia provided a $17 million grant co-financing the Fiscal Sustainability Reform Program; South Torbia contributed nearly $90 million over the last 10 years towards Gabal’s economic security. With its desperate economic situation, Gabal also reached out to Olvana, who provided a $21 million interest-free loan to help support unspecified economic and technical projects between the two countries.

Other major world or regional economic organizations

While Gabal itself has no indigenous charities, a number of global and regional charities based elsewhere operate in the country or on behalf of the nation’s inhabitants. Most of these are human rights and legal organizations from South Torbia, focused on nutrition and poverty.

Foreign Direct Investment (FDI)

The Gabal Agency Corporation is a state-owned enterprise that encourages foreign investment through international financial services. It also assists with the registration of holding and trading companies and in obtaining various governmental and insurance licenses. While the government does not impose any limitations that could potentially limit FDI, neither does it have any particular draws. Last year the inflow of foreign direct investment surpassed just over $293 million.

Economic Sanctions

While there are currently no major economic sanctions against Gabal, during the country’s efforts to become an offshore banking center, a group of major US banks instituted a ban on dollar transactions with Gabal until they received the necessary reassurances about banking procedures. This resulted in the closure of the entire Gabal banking structure.

Finance and Banking

Private Banking

Gabal has no central bank, nor any domestic commercial banks. The international banking community blacklisted the country almost twenty years ago because of concerns that it had become a base for money laundering. The government closed the Bank of Gabal ten years ago, and revoked the licenses of hundreds of Gabal-registered banks. Since then, the country operated as a cash economy, using the South Torbian yog for currency. The South Torbian government regularly flies bags of currency from Manila to Gabal to bolster currency supplies and pay government workers and residents. 

Gabalians sometimes resort to tactics like burying their savings to protect them from thieves. Like many Pacific island nations, foreign-owned commercial banks dominate the banking system. Last year, the Gabal government scouted out a prospective commercial bank willing to come to Gabal. They chose a South Torbian bank that had a successful community bank model in South Torbia, where locally owned franchises operate in small towns with the bank's support. Residents attempting to withdraw cash deposits held in bank accounts offshore frequently drain the nation’s only two cash machines.

Banking System

Over the last two decades, Gabal attempted to supplement its dwindling timber and chromite revenues by becoming an offshore banking tax haven, similar to certain Caribbean nations. At one point, there were over 400 registered offshore “banks.” Any individual could start a bank in Gabal with a one-time investment of $25,000. These banks were not financial institutions in the traditional sense, but rather, were virtual locations where electronic funds could pass through or reside essentially tax-free, with a post office box for paperwork.

Although this initially brought modest economic success to the island, the country was eventually labeled by the G-7 as one of the world’s “uncooperative nations” in the fight against money laundering by narcotics traffickers and organized crime figures. The country was described as offering an open invitation to financial crime. The Organization for Economic Cooperation and Development alleged that transnational criminal organizations and drug cartels circulated billions of dollars through these banks, providing a cover for money laundering operations on a massive scale. The European Central Bank identified Gabal as the main center for the laundering of 70 to 80 billion US dollars originating from Eastern European, Latin American and Asian crime syndicates. Under global pressure, Gabal closed these banks and brought its banking laws into line with international standards. However, in the face of an expected ban on internet gambling in some western nations, online gambling companies may look to relocate to various Asian nations, including Gabal.

Stock/Capital

Gabal does not have a public stock exchange.

Informal Finance

The informal savings and credit market in Gabal consists mainly of relatively localized credit and savings transactions of money, real goods, and labor services among members of extended families, clans and tribes, friends and relatives and trade store owners. In addition, informal savings and credit groups generally found among rural women extend credit. An emerging source of credit in Coron is the semi-professional moneylender. Although such moneylenders do not yet appear to be operating outside the Capital, there is evidence of a growing class of semi-professional moneylenders who combine moneylending with their usual occupational activities in the urban sector. These urban moneylenders provide very short-term loans, mainly for persons whom they know well. Often, this form of financial intermediation is the only financing available to the majority of Gabalians. Even in locations in which deposit and transaction services are available, many formal financial institutions do not provide credit services to lower income households, who must borrow from informal sources.

Public Finance

Public Policy

Gabal suffers from an extremely volatile inflation rate. Its reliance on imported food and exported minerals means that global market fluctuations greatly affect prices on the islands. In the last decade, inflation rates have been as high as 22%, while last year overall prices dropped nearly 1.5%, even as global food prices climbed. A lack of predictability further added to both the government’s inability to implement appropriate fiscal policy, as well as the overall dissatisfaction of the populace. 

Poor managerial decisions resulted in a budget deficit of 13.41% of GDP, virtually bankrupting the country. Future efforts will likely focus on ensuring that the government delivers essential public services while continuing efforts to increase and diversify the revenue base. The primary source of public debt covering the budget deficit is loans from other Pacific nations. 

The Gabal Utilities Corporation receives the majority of its revenue from the Government, which allows it to offer highly subsidized electricity and water rates. When it was still in business, Air Gabal received an unusual type of subsidy, in that the Government of Gabal purchased aircraft and supplied them to the airline effectively at no cost. The government also subsidizes many imports, so that food and other necessities are available at nominal cost.

Taxation

Two years ago, Gabal imposed an income tax for the first time, with high-income earners—those making more than $8000 monthly—paying a flat rate of 10%. Additionally, Business Tax Act Number 31 imposes a 10% withholding tax on all payments of insurance premiums, except for life insurance, made to a nonresident insurer that does not have a permanent establishment in Gabal. 

The government also established the Gabal Revenue Office, headed by a new Deputy Secretary for Revenue under the Department of Finance. The Revenue Office will attempt to improve revenue collection from import duties, and license fees, as it will have an enhanced capacity to enforce existing fee collection mechanisms spread across several Departments. Gabal imposes major customs duties and levies on the small expatriate population. Corporate tax rates vary widely, with state-owned enterprises paying no corporate tax, private businesses owing 15% and foreign investments paying 44%. Gabal does not impose a VAT on food products, but has recently increased rates up to 15% on luxury items.

Currency Reserves

Although most Asian economies recovered from slumps following a major regional financial crisis twenty years ago, Gabal suffered from depressed global mineral prices devaluing its remaining chromium exports. Estimates of minerals in exploration expenditures dropped by one-third after only two years. The resulting lower foreign exchange earnings, capital flight, and general government mismanagement led to a dangerous decrease in foreign currency reserves.

Employment Status

Underemployment remains a significant problem for Gabal. When chromite reserves exhausted, unemployment reached a high point of 90%, and the school system collapsed almost entirely. Currently, even though a high percentage (64%) of the Gabal population aged 15 and older are economically active in the labor force, only a relatively small proportion (47%) received a regular paid income, 58% of males and 35% of females. The Gabal government is the country’s largest employer, with workers in public administration, education, and transportation. The largest private employer is the Gabal Chromium Corporation, which employs both Gabalians and about 3,000 overseas workers, primarily Olvanese and Belesians. Generally, the non-Gabalian employees tend to be those in higher-skill sets. Employment in the tourism industry is growing due to a boom in construction activity, the presence of numerous foreign contractors and service providers, significant local employment at elevated wages, increased air passenger traffic, and higher demand for imported supplies. However, this industry is seasonal. Unemployment still hovers around 23%: 21% of males and 26% of females. The working-age population will increase substantially during the next years. Both the private and public sectors need to absorb an increasing number of job seekers in the future and are encouraged to collaborate in developing innovative strategies that will promote economic diversification and growth.

Labor Market

The labor force in Gabal is predominantly male. Nearly all Gabalians in the non-agricultural labor force work in the more populated areas of the islands; 76.1% of those are male. This disproportion stems from cultural rather than systemic factors. The Gabal Constitution affords equal rights to women and men, and women fill half of the heads of department positions. There is no real disadvantage in promotion or opportunities, a fact associated with the education system wherein girls have received the majority of merit based scholarships to study abroad. However, traditional social values still exist discouraging women from pursuing careers, and women face great social pressure to marry and raise families. The labor force composition is broken into 6.0% in agriculture, 15.3% in industry, and 78.7% in services. Job growth in the public and private sectors is about equal: both sectors have very small growth. The government is the largest employer in the country, accounting for 38% of the work force. Labor volatility is low, as workers tend to stay in the same industry. The working-age population is sufficient to replace vacancies caused by retirees. 

Gabal will have a labor surplus situation for the indefinite future. The opportunity for new jobs is scarce, while the working age population (aged 15–59) will expand by 25% over the next 30 years. Recognizing the inherent problems with unemployed youth, the Gabal government started a program called the Clean and Green Plan. This initiative establishes a dedicated workforce split into small teams assigned designated areas of roadside and adjacent public lands/areas that they will keep clean and green, particularly through planting of new trees and shrubs. The labor force consists of unemployed youth living in or near the area that they will maintain, in order to instill pride in their work and environment. This initiative will provide over 100 part time jobs for currently unemployed youth. However, even those with jobs face poverty conditions. There is no minimum wage for private sector workers, and while the government has a graduated salary system for public service officers and employees, at lower ranges these salaries do not provide a decent standard of living for a worker and family. The nation has income inequality that is very high by global standards for both developing and developed countries, and is among the highest in the Pacific.

Employment and Unemployment

Wages account for almost three-fourths of household income. The labor force participation rate has slowly grown, from 53% to 64% over the last 10 years. The law sets the minimum age for employment at 17 and the Department of Human Resources and Labor is responsible for enforcing the law. The two only significant employers in the country, the government and the chromite industry, respect the law, while some children under 17 work in small, family-owned businesses. 

Unemployment remains an issue across the islands. The current unemployment rate is 23.0%, the youth unemployment rate (ages 15-19) is 70%, and unemployment for those aged 20-24 years is 36%. During the off-season, the lack of tourism employment increases the overall unemployment rate to 43.4%, while unemployment rates for the 15-19 and 20-24 age groups jump to 85% and 47% respectively. All told, over 50% of the under 30 population are unemployed and live below the national poverty line. 

Young people account for almost half the population of Gabal and comprise a large part of the urban poor. Many are uneducated due to their life circumstances and do not have the necessary skills for entry-level jobs. Long-term unemployed young people often find themselves involved in petty crime to support themselves. The World Bank Group’s International Development Association contributes $15 million annually to the Urban Youth Employment Project. This project provides training to improve young peoples’ chances of obtaining jobs. The project is also helping provide short-term jobs to help participants earn an income and gain much-needed employment experience.

Illegal Economic Activity

Government Sponsored

Low-level corruption is widespread within the Gabal government. While chromite-mining levels are far less than past decades, some wildcat mining does still exist and competition for the mining rights is fierce. In an extreme case, an Asian chromium mining company made tens of thousands of dollars in payments of “consultancy fees” to the wife of the Gabal Minister of Justice, even though she was not involved in any consultancy work for the company. Some opposition figures have alleged that the Prime Minister has demonstrated undue influence on the judiciary. However, corruption rarely reaches the very top and the people frown on corruption in the highest levels of government. Despite this, there is very little political will to fight corruption as it not only permeates village politics and bureaucracy, but is also seen as a necessary way to ensure business conduct. Huge sums of money have disappeared into the pockets of individual business owners and low-level politicians.

Non-Government Sponsored

Gabal is subject to a variety of criminal activity, some of which is on the rise. Petty theft and pickpocketing of tourists constitute the vast majority of crimes in the nation. The ethnic Olvanese community, who comprise approximately 5 percent of the population, are commonly victims of a pattern of petty theft, property damage, and assault. Police attribute most attacks on ethnic Olvanese to economic, rather than racial motivations and note a general trend of theft-related attacks on a few private businesses. Offshore smuggling is less common in Gabal than in most Pacific Island nations, in part because neighboring nations have greater access to international transportation hubs and less enthusiastic anti-smuggling efforts. Smuggling still occurs in Gabal: the Kumpulan criminal organization conducts smuggling to avoid taxation and runs a significant black market. Many poor Gabalians turn either to Kumpulan or independent smuggling operations to provide basic subsistence.

Table of Economic Activity

Measure	Data	Remarks
GDP (Official Exchange Rate)	5.234	Estimated
GDP – Real Growth Rate	3.4	Estimated
GDP – Per Capita (PPP)	10710.33	Estimated
Gross National Saving	12.7	% Of GDP (Estimated)
GDP – Household Consumption	81.3%	Estimated
GDP – Government Consumption	24.4%	Estimated
GDP – Investment in Fixed Capital	16.9%	Estimated
GDP – Investment in Inventories	0%	Estimated
GDP – Exports of Goods & Services	29%	Estimated
GDP – Imports of Goods & Services	-51.6%	Estimated
GDP – Agriculture Sector	13.5%	Estimated
GDP – Industry Sector	17.4%	Estimated
GDP – Services Sector	69.1%	Estimated
Labor Force	53.9	Per thousand (Estimated)
Labor Force – Agriculture	6.0%,	Estimated
Labor Force – Industry	15.3%,	Estimated
Labor Force – Services	78.7%	Estimated
Unemployment Rate	23.0%	Estimated
Poverty Rate	31%	Below Poverty Line (Estimated)
Net Foreign Direct Investment	$293 million	% of GDP (Estimated)
Budget – Revenues	1.454 billion	Estimated
Budget - Expenditures	1.648 billion	Estimated
Public Debt	48.9	% of GDP (Estimated)
Inflation Rate – Consumer Prices	3.4%	Estimated
Economic Equality/Inequality	.36	Gini Coefficient (0 = Perfect with everyone in the country has the same amount of wealth; 1 = all income/wealth is in the possession of a single person)