2018 Index of Economic Freedom

Solomon Islands

overall score57.5
world rank114
Rule of Law

Property Rights49.4

Government Integrity36.8

Judicial Effectiveness57.3

Government Size

Government Spending35.6

Tax Burden65.5

Fiscal Health99.8

Regulatory Efficiency

Business Freedom68.9

Labor Freedom72.4

Monetary Freedom84.0

Open Markets

Trade Freedom74.7

Investment Freedom15.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.6 million
  • GDP (PPP):
    • $1.2 billion
    • 3.3% growth
    • 2.9% 5-year compound annual growth
    • $1,973 per capita
  • Unemployment:
    • 31.4%
  • Inflation (CPI):
    • 0.4%
  • FDI Inflow:
    • $24.5 million
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The Solomon Islands’ economic freedom score is 57.5, making its economy the 114th freest in the 2018 Index. Its overall score has increased by 2.5 points, with significant improvements in the judicial effectiveness and property rights indicators outweighing a decline in trade freedom. The Solomon Islands is ranked 26th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

Historically, governments in the Solomon Islands have lacked enough cohesion and focus to generate and implement a long-term economic strategy. Economic development has been stifled by other serious deficiencies as well, such as widespread violence, poor governance, an inefficient and bloated public sector, an underdeveloped legal framework, and inadequate physical infrastructure. In spite of some attempts at reform, widespread corruption, limited protection of property rights, and weak rule of law also increase the cost of doing business and deter investment.

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Background

The scene of some of World War II’s bitterest fighting, the South Pacific archipelago of the Solomon Islands gained independence from the U.K. in 1976 and became a parliamentary democracy. In 2003, after years of ongoing and economically destructive ethnic violence, an Australian-led multinational force disarmed ethnic militias, restored law and order, and rebuilt government institutions. Manasseh Sogavare, who previously had served twice as prime minister, was reelected by parliament in December 2014 for a four-year term. Although the islands are rich in timber and undeveloped mineral resources such as lead, zinc, nickel, and gold, the bulk of the population continues to work in subsistence farming, fishing, and artisanal forestry. The Solomon Islands remains one of Asia’s poorest nations.

Rule of LawView Methodology

Property Rights 49.4 Create a Graph using this measurement

Government Integrity 36.8 Create a Graph using this measurement

Judicial Effectiveness 57.3 Create a Graph using this measurement

The government has not improved contract enforcement or property registration procedures. Only Solomon Islanders may own land. Conflicts over land tenure have been a major source of civil unrest. The judiciary is inadequately resourced, and residents of rural areas have limited access to the formal justice system. Government corruption and impunity are pervasive, especially in the forestry and fishing sectors.

Government SizeView Methodology

The top personal income tax rate is 40 percent, and the top corporate tax rate is 30 percent. Other taxes include property and sales taxes. The overall tax burden equals 30.8 percent of total domestic income. Over the past three years, government spending has amounted to 46.3 percent of total output (GDP), and the budget has been balanced, largely with Australian aid. Public debt is equivalent to 9.0 percent of GDP.

Regulatory EfficiencyView Methodology

In 2016, doing business was made easier when the government improved access to credit information by establishing a credit bureau. The formal labor market is not fully developed. The majority of the population depends on agriculture, fishing, and forestry for part or all of its livelihood. About one-third of total public spending subsidizes agriculture and infrastructure development projects, many of which are funded by international donors.

Open MarketsView Methodology

Trade is extremely important to the Solomon Islands’ economy; the combined value of exports and imports equals 101 percent of GDP. The average applied tariff rate is 7.7 percent. Nontariff barriers impede some trade. Many sectors of the economy are reserved to domestic investors, limiting foreign investment. Banking dominates the underdeveloped financial sector, and access to credit, particularly long-term credit, remains very limited.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.4
2Singapore88.80.2
3New Zealand84.20.5
4Australia80.9-0.1
5Taiwan76.60.1
6Malaysia 74.50.7
7South Korea73.8-0.5
8Japan72.32.7
9Macau70.90.2
10Vanuatu69.52.1
11Kazakhstan69.10.1
12Thailand 67.10.9
13Philippines65-0.6
14Azerbaijan64.30.7
15Indonesia64.22.3
16Brunei Darussalam64.2-5.6
17Tonga63.10.1
18Kyrgyz Republic 62.81.7
19Fiji62-1.4
20Bhutan61.83.4
21Samoa61.53.1
22Cambodia58.7-0.8
23Tajikistan58.30.1
24China57.80.4
25Sri Lanka57.80.4
26Solomon Islands57.52.5
27Mongolia55.70.9
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
30India54.51.9
31Pakistan 54.41.6
32Nepal54.1-1.0
33Burma53.91.4
34Laos53.6-0.4
35Vietnam53.10.7
36Micronesia52.3-1.8
37Uzbekistan51.5-0.8
38Afghanistan51.32.4
39Maldives51.10.8
40Kiribati50.8-0.1
41Timor-Leste48.11.8
42Turkmenistan47.1-0.3
43North Korea5.80.9
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