The Solomon Islands is a constitutional monarchy and has a parliamentary system of government. Solomon Islands governments are characterized by weak political parties and highly unstable parliamentary coalitions. They are subject to frequent votes of no confidence, and government leadership changes frequently as a result. Cabinet changes are common. Land ownership is reserved for Solomon Islanders. The law provides that resident expatriates, such as the Chinese and Kiribati, may obtain citizenship through naturalization. Land generally is still held on a family or village basis and may be handed down from mother or father according to local custom. The islanders are reluctant to provide land for nontraditional economic undertakings, and this has resulted in continual disputes over land ownership.
The national GDP per capita of $1223 ranks Solomon Islands as a lesser developed nation, the nominal GDP per capita was estimated by the IMF to be at $657 million in 2009. While the population of the Solomon Islands was estimated at 523,000 in 2009 by the UN. Over 75% of its labour force is engaged in subsistence farming and fishing. Other important cash crops and exports include copra and palm oil. Since 2000 the Government of Solomon Islands has become increasingly insolvent. It has exhausted its borrowing capacity; in 2001 the deficit reached 8% of GDP. It is unable to meet bi-weekly payrolls and has become extraordinarily dependent on funds from foreign aid accounts, which provided an estimated 50% of government expenditure in 2001. Overall, the economic structure can be broken down into the following sectors, agriculture: 42%, industry: 11%, services: 47%. Solomon Islands’ fisheries also offer prospects for export and domestic economic expansion. However, a Japanese joint venture, Solomon Taiyo Ltd., which operated the only fish cannery in the country, closed in mid-2000 as a result of the ethnic disturbances. Though the plant has reopened under local management, the export of tuna has not resumed.
The islands are rich in undeveloped mineral resources such as lead, zinc, nickel, and gold. Tourism, particularly diving, is an important service industry for Solomon Islands. Growth in that industry is hampered, however, by lack of infrastructure and transportation limitations. The main export products of the islands are timber, fish, palm oil, cocoa, copra. While the main products that it imports are plant and equipment, manufactured goods, food and live animals, fuel. Their are certain agricultural products that the Solomon islands are better capable of producing due to climate and geography, and those are : cocoa, beans, coconuts, palm kernels, rice, potatoes, vegetables, fruit, cattle, pigs, timber, fish. However, even with the wide variety of products, the economy of the Solomon Islands has had a hard time meeting the basics requirements of government tax revenues. The government is highly dependent on foreign aid to meet its budgetary needs, with foreign aid as a percentage of GDP being at nearly 41% in 2006.
Overall, the Solomon Islands are a very difficult country to invest or do business in. Most areas of the economy are under developed or are simply not functioning. Add to this mix, the recurring bouts of political instability, and you essentially have a dead end market. While the tourism sector holds considerable promise, due to the location and climate of the islands. Most of the other countries in the area generate large revenues from tourism, which points to the relative lack of appeal from investors in investing in an area that is a natural fit for the Solomon Islands. However, the government has been unable to capitalize on this opportunity. Which is why, it is likely that the Solomon Islands will continue to be a dead end market well into the future.