Economy of French Polynesia

Before French colonisation, the Polynesian islands that constitute nowadays French Polynesia, relied on a subsistence economy. Work was heavily organised and performed by the community as a whole under the direction of the Arii ruling class and the priests. Mountains were terraced for agriculture production, river banks were contained by stone walls, artificial soil was created on atolls in large trenches, and large systems made out of coral stone walls trapped and stocked live fish. Production outputs were divided by the ruling class between the population.

After the contact was established with European ships, foreign diseases killed large portions of the populations, and Christian beliefs and clergy produced a huge shift in the culture of those islands. With fewer population to feed, more land per capita was available, and the land use switched toward the limited production required by a family to live. Habitations moved toward seashores as the population relied more on the lagoon and sea trade. European ships stopped in those islands to purchase water, salt pork meat, dried fish and fresh fruits.

As French, English and Americans settled, part of the agriculture moved towards exports of oranges, coprah, coffee, cotton, and vanilla. They also exported Tahitian black pearls and sandalwood. Santal wood nearly disappeared, cotton production was short-lived, as the US's south recovered from the American Civil War, and coffee and orange trees suffered from imported diseases that stopped those exports. Coprah and vanilla prices and competition worldwide impacted heavily those productions in the second half of the 20th century, although they still exist. The guano mining at Makatea started in 1917 and stopped in 1966 when the stocks were depleted.

In 1962, France stationed military personnel in the region and started nuclear experimentations in Moruroa. French Polynesia's economy switched to services to support the military and the growing tourist industry.

Tourism accounts nowadays for about 13% of the GDP, and is a primary source of foreign currency earnings. The tourist industry was heavily impacted after the 9/11 terrorist attacks and the 2008 economic crises, and never really recovered since. There are around 160,000 tourists per year. The local government mostly focuses its action at developing a high-end market with luxurious hotels built with foreign investment and French tax cut incentives, but many of these investments close after a few years. The subsidized air company Air Tahiti Nui brings tourists from France, Los Angeles, Japan and China. Other companies also operate, like Air France and Air New Zealand.

The small manufacturing sector primarily processes agricultural products. Vanilla and pearls are its main exports.

The public administration is an important part of the GDP and a provider of stable employment. The French republic finances the functionaries working in education, justice, hospitals, gendarmerie (military police), and military. The local government controls its own administration, like the ministry of agriculture, and oversees the administration and buildings of some sectors like schools. The local government also influence a large part of the economy through subsidies and development programs.

Some parts of the economy involve quasi-monopolistic groups due to the small economy size, the challenges of a country of small islands spread in a huge oceanic space, and the action of the government through subsidies and public companies. Some sectors show an important horizontal and vertical integration trend. Recently, the local government tries to maintain a healthy competition and regulate the growth of the biggest groups, but face many challenges. For example, it was unable to prevent a major supermarket group to develop its own vegetable production, ending its supplying contracts with local farmers. But it blocked the merger of two local shipping companies to avoid a monopoly on some trade routes. The price of shipping goods between islands is fixed by the government, and subsidies are provided for transporting some items like farming products or construction materials.

Some products' price margins are controlled by the local government to reduce the disparity of prices between the different archipelagos. Import taxes and VAT are fixed and collected by the local government that also control what imports are allowed to protect its agriculture and nature from diseases and invasive species.

The majority of the population is of mixed Polynesian and European origin. Around 5% of the population is of Asian origin, descending from farm workers imported in the 19th century to work in the cotton fields. They are present in the administration and trading sector of the economy. The recent metropolitan population is mostly involved in the state administration and in small and medium-sized enterprises.