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External Website: Cook Islands Development
Investment Board
The Cook Islands is located 3,013 km north-east of New Zealand in South Pacific. It is made up of 15 islands, 13 of which are inhabited. The 15 islands are divided into two groups. The northern islands are made up of low-lying coral atolls and one sandy cay. The southern group is mostly volcanic formation and makes up 90% of the Cook Islands land area. The main, and largest island is Rarotonga which is where Avarua, the capital, is located. The total land area of the Cook Islands is 240 square kilometers but the islands span over two million square kilometers of ocean which makes up the Exclusive Economic Zone. The larger islands have lagoons which are surrounded by fertile soil. Agriculture is therefore one of the country's biggest sources of income. Agriculture and fishing revenues made up 18% of GDP in 1995 and agricultural exports made up 32.1% of export earnings. Another natural resource, which has great potential for growth is the large area of ocean covered in the EEZ. Currently there are a number of small fisheries in operation, a lagoon fishery and an underdeveloped industrial fishery. Revenue in this sector is also largely drawn from the sale of fishing licenses. There are two deep-water ports, in the southern group on Rarotonga and in the northern group on Penrhyn. There is also a large market for black pearls, an industry which earned 8.2% of export earnings in 1993. Mining exploratory tests which began in 1992 uncovered manganese nodules on over a third of the sea bed in the Cook Islands' EEZ. There are also tests being conducted to determine the presence of other valuable minerals such as cobalt. The main service industry, and leading economic sector, is tourism which is concentrated in Rarotonga. In 1994 there were huge developments in air transportation to the Cook Islands which increased the number of tourists by well over 50%. Offshore banking is the second leading service industry. Trade is very dependent on New Zealand. Exports come mainly from New Zealand and consist mainly of food, manufactured goods, machinery, equipment and fuel. New Zealand is a small export market for the Cook Islands though. Other trading partners for the Cook Islands include Japan, Australia and the United States. The economy of the Cook Islands is heavily influenced by the public sector. The government employs about 44% of the workforce. This figure, however, was expected to drop to 15% after reforms were implemented in 1996. Government consumption and investment over the past ten years has expanded the economy significantly. The government has a business development fund which is mainly used to promote tourist growth. The government has been mainly promoting the tourism industry and focusing less on the production of goods. The increase of government spending has led to a large debt and budget deficits. The Asian Development bank has helped the government establish an economic reform program which will restructure the development, planning and management process of the government. The plan involves public sector restructuring which was expected to lead to a 16% decline in GDP in 1997 but then a 4% increase in 1998 due to growth in the private sector. The predicted growth sectors are agriculture, marine and tourism. The Pacific Islands Industrial Development Scheme provides for subsides and concessions from the New Zealand government towards the private sector. The Cook Islands are also a member of the South Pacific Forum, the South Pacific Commission, the UN Economic and Social Commission for Asia and the Pacific and the Asian Development Bank.
The Cook Islands is a sovereign, self-governing state in free association with New Zealand. The Head of State is the Queen of England. The government has a unicameral legislature which consists of a 25 member parliament. There is full adult suffrage, with compulsory registration and elections for parliament are held at least every five years. The Cabinet is made up of the Prime Minister and six to eight ministers. There is also a House of Ariki which is made of 15 chiefs and acts as an advisor on the customs and traditions of the Cook Islands as well as the welfare of the people. The judicial system has a High Court which has civil, criminal and land divisions. Two permanent judges are appointed to this court by New Zealand. There are also justices of the peace who have less jurisdiction. Appeals are made to the Court of Appeals and then to the Privy Council in London for civil and criminal matters. Law in the Cook Islands is based on New Zealand law and, more generally, on English common law. The New Zealand Parliament can not legislate on any matters regarding the Cook Islands but may take certain responsibilities for defense at the request of the Cook Islands. Cook Islands may also conduct its own external affairs and enter directly into international agreements. Cook Islands residents are also New Zealand citizens. Orientation of Major Political Parties The two major political parties which have held power since the Cook Islands have been self-governing are the Cook Islands Party (CIP) and the Democratic Party (DP). The CIP has been in power since 1989 and has held 19 out of 25 seats since 1996. The DP has undergone a split and some fragmentation.
III. MARKETING U.S. PRODUCTS AND SERVICES Steps to Establishing an Office Enterprises where foreign equity exceeds 33% must register with the Development Investment Board as stated by the Development Investment Act of 1995-1996. Investment is also governed by the Leases Restrictions Act of 1976 and the Entry Residence and Departure Act of 1977. The Leases Restrictions Acts of 1976 restricts the freehold ownership of land. Land ownership in the Cook Islands is customary and private ownership of land by foreign investors is not allowed. Land may be leased for up to five years. Leases longer than five years must be approved by the Committee formed under the Act and may be granted for a maximum of 60 years. The Entry Residence and Departure Act states that non-citizens of the Cook Islands must obtain a residence permit and a work permit before they are able to work in the Cook Islands. Residency and work permits are normally granted on an annual basis but can be issued for up to three years. Foreigners other than New Zealanders may apply for permanent residency after five years. Along with these three pieces of legislation, there is sector specific legislation for certain investment sectors. They are:
In the cases of takeovers, mergers or acquisitions, proposals are reviewed by the Cook Islands Monetary Board. The minimum period for approval of projects is six weeks. Advertising and Trade Promotion There are several press channels which may offer advertising:
Price controls are put on a small range of essential goods, particularly food items. Intellectual Property Rights Protection There is legislation in the Cook Islands that governs intellectual property rights. The specific acts that apply are the Patents Act, 1953, the Design Act, 1953, the Trademarks Act, 1953, and the Copyright Act, 1962. Need for a Local Representative It is advisable for new or small exporters to use a trading house in order to become established in the market.
IV. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT Best Prospects for Non-Agricultural Goods and Services
Best Prospects for Agricultural Products
V. TRADE REGULATIONS AND STANDARDS Exemption from customs duty and levy is available upon application. Import licenses are required for goods that are imported from countries other than New Zealand. Most goods are duty-free although there may be a duty applied to manufacturing inputs. Foreign investments are not subject to strict export ratios. Openness to Foreign Investments The government of the Cook Islands encourages local investment when it is beneficial to the economy and involves as many Cook Islanders as possible or as is practical. The government requires that investments in the Cook Islands:
There are several areas of investment which are restricted from foreign investors. Permission may only be given to foreign investors in these areas in the cases where the foreign investor will have a good chance of succeeding through a joint venture with a local individual or company. Some of the restricted areas are:
The government especially encourages investment from certain countries including Australia and New Zealand, through the South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA), which provides for duty-free access to New Zealand for goods produced in the Cook Islands, and the U.S., Canada and Japan, through the Generalized System of Preferences (GSP). Expropriation and Compensation Foreign enterprises that are registered with the Development Investment Board will not be subject to compulsory acquisition or expropriation unless it is:
Enterprises will be entitled to:
Performance Requirements/ Incentives There are incentives offered by the government for investment in certain sectors such as commercial agriculture, fishing operations, commercial manufacturing and tourism. The incentives are outlined in the Development Investment Code and include:
Right to Private Ownership/Establishment The government allows businesses in the Cook Islands to be conducted as companies, under partnership or sole ownership. The government, however, encourages joint ventures between local and foreign investors. The regulatory system for foreign investment is made up of the regulatory body for a certain sector, the Development Investment Act and the Investment Code. OPIC and Other Investment Insurance Programs The Overseas Private Investment Corporation (OPIC) is extended to the Cook Islands and provides political risk insurance, finance, direct loans and loan guarantees. Formal unemployment in the Cook Islands is low. There is a shortage of skilled and qualified workers in both the public and private sectors. Because of this shortage, expatriate employees are allowed in cases where there are no qualified local employees to fill a position. All expatriate employees must apply for a work permit and a residency permit. Labor relations are governed by the Industrial and Labor Ordinance of 1964 which also covers workers compensation. Minimum wage in the Cook Islands is US $1.72 per hour. Capital and profit repatriation are not subject to regulations.
VII. TRADE AND PROJECT FINANCING Brief Description of Banking System The Cook Islands and the New Zealand currencies are both valid in the Cook Islands. Domestic and international banking services are provided by the Westpac Banking Corporation and the ANZ Bank. Domestic services are also available from the Cook Islands Savings Bank. Offshore services are also available from a number of banks, including Bermuda Trust, Ltd., South Pacific Trust Corporation, Asiaciti Trust Ltd. and Trust Net (CI) Ltd. There are no exchange controls in the Cook Islands which would impede repatriation of capital, profits, dividends, royalties, loan payments, interest earned on loans and other types of foreign owned finance. General Financing Availability The Cook Islands Development Bank can offer assistance for the development of many business ventures. In order to promote broadly based economic growth, the International Bank for Reconstruction and Development (IBRD), a member of the World Bank group, makes long-term loans at market related prices. They usually focus on structural adjustment, sector reform and individual project lending. Instead of financing a whole project, the IBRD normally finances parts of project purchases with foreign exchange, which are on typically 40% of the total project cost. Projects may cover a variety of sectors and can involve many separate contracts. In turn, these will provide export business opportunities for suppliers worldwide. The Asian Development Bank (ADB) is an international financial development bank which has its headquarters in the Philippines. In order to promote social and economic progress in its developing member countries, the ADB lent $5.5 billion in 1995. There are 56 member countries in the ADB with the United States and Japan being the largest shareholders. The largest portion of funds were lent to the energy sector followed by social infrastructure, transport, communications, agriculture and agro-industry, finance, industry and non-fuel minerals. The ADB's aims in its medium-term strategy are to reduce poverty, improve the status of women, aid in population planning, and environmental protection. The bank is taking the role of a catalyst for development and will use its financial resources along with co-financing and other techniques to attract private capital in funding the development needs of its member countries. There is a Commercial Liaison Office (CLO) in Manila at the U.S. Embassy. The CLO reports directly to the Office of Multilateral Development Banks at the U.S. Department of Commerce. It assists American suppliers and consultants in winning contracts for projects and activities funded by the Bank. The CLO includes a Senior Commercial Officer and two Commercial Specialists, one of which represents the U.S. Agency for International Development's United States-Asia Environmental Partnership. Further information is available from the U.S. Department of Commerce.
Business in the Cook Islands is conducted in English. Most Cook Islanders are bilingual in English and their own Polynesian dialect. Dress is casual and there is sensitivity about the way women dress so short or revealing clothing should be avoided. Formal attire may be required for church and certain social functions. Time is GMT minus 10 hours.
All visitors to the Cook Islands require a passport, except New Zealand residents who do not require passports for a stay of up to 31 days. There is a departure tax for adults and children over the age of two. Business Holidays in the Cook Islands are:
Appendix C - Contact Information U.S. and Country Contacts
Multilateral Development Bank Contacts
Government Departments and Agencies (The country code is 682)
Commercial and Development Banks
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