RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/215 
1 April 2009  
 
(09-1554) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
SOLOMON ISLANDS 
 
  
 
This report, prepared for the second Tr ade Policy Review of Solomon Islands, 
has been drawn up by the WTO Secretariat on its own responsibility.  The 
Secretariat has, as required by the Agreement establishing the Trade Policy 
Review Mechanism (Annex 3 of the Ma rrakesh Agreement Establishing the 
World Trade Organization), sought clarif ication from Solomon Islands on its 
trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Karsten Steinfatt (tel:  022 739 6759), Mr. Taufiqur Rahman (tel:  
022 739 6439), and Mr. Raymundo Valdés (tel:  022 739 5346). 
 
Document WT/TPR/G/215 contains the policy statement submitted by 
Solomon Islands. 
 
 
__________________________________________________________________________________ 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
 session of the meeting of the Trade Po licy Review Body on Solomon Islands.  
 
 Solomon Islands WT/TPR/S/215 
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CONTENTS 
 Page 
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (3) M ARKET ACCESS FOR GOODS  viii 
 (4) E XPORTS MEASURES  ix 
 (5) O THER MEASURES AFFECTING TRADE  ix 
 (6) S ECTORAL POLICIES  x  
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) O UTPUT AND EMPLOYMENT  1 
 (3) F ISCAL POLICY  3 
 (4) M ONETARY AND EXCHANGE RATE POLICY  4 
 (5) B ALANCE OF PAYMENTS  6 
 (6) D EVELOPMENTS IN TRADE AND INVESTMENT  7 
 (i) Developments in merchandise trade 7 
 (ii) Trade in services 8 
 (iii) Foreign direct investment 8 
 (7) O UTLOOK  9 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 10 
 (1) O VERVIEW  10 
 (2) G ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK  10 
 (3) T RADE POLICY FORMULATION AND IMPLEMENTATION  11 
 (4) F OREIGN INVESTMENT REGIME  12 
 (5) I NTERNATIONAL RELATIONS  14 
 (i) Participation in the WTO 14  (ii) Participation in regional and other trade arrangements 15 
 (6) A
ID FOR TRADE AND TECHNICAL ASSISTANCE  18 
III. TRADE POLICIES AND PRACTICES BY MEASURE 20 
 (1) O VERVIEW  20 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  20 
 (i) Customs procedures 20  (ii) Customs valuation 21 
 (iii) Rules of origin 22 
 (iv) Tariffs 23  (v) Other charges 29 
 (vi) Quantitative restrictions and controls 30 
 (vii) Contingency measures 31 
 (viii) Technical regulations, conformity assessment procedures, and standards 31 
 (ix) Sanitary and phytosanitary (SPS) measures 32 WT/TPR/S/215 Trade Policy Review 
Page iv 
 
 
 Page 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  34 
 (i) Registration and documentation 34 
 (ii) Export taxes, quantitative restrictions and licensing 34  (iii) Duty and tax concessions 36 
 (iv) Promotion, finance, insurance, and guarantees 38 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  38 
 (i) Business registration and taxation 38 
 (ii) Competition policy and price controls 39 
 (iii) Incentives 40  (iv) State trading, state-owned enterprises, and privatization 42 
 (v) Government procurement 43 
 (vi) Intellectual property rights 45 
IV. TRADE POLICIES BY SECTOR 47 
 (1) O
VERVIEW  47 
 (2) A GRICULTURE  47 
 (3) F ISHERIES  50 
 (4) F ORESTRY  52 
 (5) M INING   54 
 (6) E LECTRICITY  56 
 (7) M ANUFACTURING  57 
 (8) S ERVICES  58 
 (i) Introduction 58 
 (ii) Financial services 59  (iii) Telecommunications 63 
 (iv) Maritime transport and ports 64 
 (v) Air transport and airports 66  (vi) Professional services 68 
REFERENCES   71 
APPENDIX TABLES  75 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Basic economic indicators, 2000-08 2 I.2 Central Government accounts, 2000-08 3
 
I.3 Main monetary indicators, 2000-08 5 I.4 Balance of payments, 2000-08 7 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
III.1 Structure of the tariff schedule, 2009 24 
III.2 Summary analysis of the MFN tariff, 2009 24 III.3 Products for which the applied MFN tariff rate exceeds the bound rate 26 
III.4 Standing import duty exemptions, 2009 27 
III.5 Imports subject to licensing requirements, 2009      30 III.6 Export duties, 2009         35 Solomon Islands WT/TPR/S/215 
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 Page 
 
III.7 Price controls in Honiara, 2009        40 
III.8 Summary of the protection of intellectual property rights, 2008     46  
IV. TRADE POLICIES BY SECTOR 
 IV.1 Cash crop exports, 2000-07        48 
IV.2 Fisheries selected indi cators, 2000-07       50 
IV.3 Forestry selected indicators, 2000-07       52 IV.4 Summary of specific commitmen ts under the GATS      58 
IV.5 Bilateral and plurilateral air services instruments, 2008     67
 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Merchandise exports by group of products, 2000-07      77 
AI.2 Merchandise imports by group of products, 2000-07      78 AI.3 Merchandise exports by trading partner, 2000-07      80 
AI.4 Merchandise imports by trading partner, 2000-07      81 
A I . 5  T r a d e  i n  s e r v i c e s ,  2 0 0 0 - 0 8          8 2   
 
  
 Solomon Islands WT/TPR/S/215 
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SUMMARY OBSERVATIONS 
1. Economic growth since the end of 
civil strife in 2003 has been robust, but has been supported in large part by the 
overexploitation of for est resources.  Thus, 
there is a pressing need to develop long-term sources of balanced growth.  Solomon Islands has made progress toward this end by reducing the level and dispersion of tariffs, easing 
customs procedures, rationalizing fiscal 
incentives, and adopting new legislation on investment, state-owned enterprises and civil aviation.  In order to consolidate the progress made, Solomon Islands should strengthen its 
institutional capacity for trade and economic 
policy formulation and implementation.  
Economic growth would al so be supported by 
the greater transparen cy, predictability, and 
economic coherence that would result from Solomon Islands aligning its trade and 
investment regime more closely with the 
multilateral trading system in areas such as taxation, customs valuation, sanitary and other regulations, and the protection of intellectual property. 
(1) E
CONOMIC ENVIRONMENT  
2. Solomon Islands is a least developed 
country (LDC) with annual per capita income of some US$880.  The economy contracted sharply during a period of civil strife at the beginning of this decade.  Economic growth 
resumed from 2003, and was particularly brisk 
in 2007 when it reached a real growth rate of 10.3%;  the estimated rate for 2008 was 7.3%.  Growth has been supported by strong domestic demand, particularly Government expenditure, 
and logging exports.  However, with the 
imminent decline in logging sector activity due to overexploitation, Solomon Islands faces major economic challenges in the medium term, as logging accounts for 18% of GDP and almost 75% of total exports.   
3. Immediate measures are thus required 
for Solomon Islands to achieve a more rational exploitation of its natural resources and to build up its infrastructure.  This would require Solomon Islands to accelerate the pace of trade and other policy reforms in order to address 
problems such as poor infrastructure, costly and unreliable services, and ambiguity in land ownership. 
4. Government finances are heavily 
dependent on proceeds from export taxes on logs and foreign aid flows;  however, these revenue sources are expected to decline in the near future.  In spite of recent progress, further 
measures are needed to strengthen the 
Government's fiscal position, including broadening the revenue base, improving tax administration, and rationalizing fiscal spending.  Since 2007, the Central Bank has sought to counter rising inflationary pressures 
by absorbing excess liquidity and maintaining 
the SI dollar pegged to the U.S. dollar. 
5. Trade is increasingly important for 
Solomon Islands:  merchandise exports and imports represented almost 70% of GDP in 
2006, compared with 47% in 2003 (based on 
national account data).  Virtually all exports consist of primary produc ts, particularly logs 
and palm oil, while imports are diversified.  During the period under review, China became the main export market, accounting for some 
55% of total exports, mostly logs and other 
primary products.  Singapore and Australia are the main import sources, accounting for almost two thirds of the total. 
(2) T
RADE AND INVESTMENT POLICY 
 F RAMEWORK  
6. Solomon Islands' trade and investment 
policy framework has been considerably undermined by political instability and weak institutions.  Solomon Islands experienced 
serious civil unrest during 1999-02, leading 
the Government to request the intervention of the Regional Assistance Mission (RAMSI) in 2003 to restore law and order.  This initiative has been a key catalyst for recent trade and other policy improvements, and it is crucial to 
ensure that reform efforts retain the support of 
Solomon Islands stakeholders once RAMSI's mandate winds down.  Constitutional and 
other changes under consideration to enhance WT/TPR/S/215 Trade Policy Review 
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governance structures could play a significant 
part in this respect. 
7. Solomon Islands has been a member 
of the WTO since July 1996;  it is a non-
resident Member and the only LDC Member 
in the Pacific.  The authorities' interest in the multilateral trading system is limited.  Moreover, Solomon Islands faces major resource and capacity constraints in 
participating in the multilateral trade 
negotiations and the regular work of the WTO.  It benefits from WTO trade-related technical 
assistance and from support for trade capacity building from multilateral agencies and bilateral donors.  It is also a beneficiary of the 
Enhanced Integrated Framework.  Solomon 
Islands continues to lack a framework to formulate trade policy, which is done on an ad hoc basis. 
8. Solomon Islands is a party to several 
regional trade and economic cooperation 
arrangements in the Pacific.  It receives unilateral preferential market access granted by some developed Members of the WTO, through GSP and other programmes for LDCs.  It is taking part in the Pacific ACP-EC 
Economic Partnership Agreement 
negotiations. 
9. Since its last Trade Policy Review in 
1998, Solomon Islands has liberalized its foreign investment regime.  A new Foreign 
Investment Act was adopted in 2005, 
simplifying the registration procedure for foreign investment by replacing a lengthy approval process.  The number of activities reserved for domestic investors has fallen from 
54 to 14.  The reserved activities are mostly 
related to the small-scale supply of goods and services to the domestic market.  However, poorly defined property rights and political instability, compounded by cumbersome provincial business licensing requirements, 
remain key obstacles in attracting foreign 
direct investment to the country. (3) M
ARKET ACCESS FOR GOODS  
10. Since the last Review of Solomon 
Islands, the authorities have increased automation in customs procedures and adopted 
risk profiling as part of efforts to enhance 
control and revenue collection, which were found to be inadequate in a 2003 audit.  Solomon Islands has not adopted legislation to implement the Customs Valuation Agreement;  
customs values are assessed according to the 
Brussels Definition of Value. 
11. The simple average applied MFN rate 
declined significantly during the review period, from almost 23% in 1998 to around 9% in 2008.  Tariff dispersion has fallen 
sharply, with the vast majority of items 
carrying a 10% rate.  This is helping to improve resource allo cation and revenue 
collection, and facilitate customs administration. However, statutory and 
discretionary import duty exemptions partly 
undermine these goals, and the transparency of the tariff regime.  Solomon Islands has bound all of its tariffs, mostly at a rate of 80%;  some applied rates exceed their bindings.  Correcting this problem, and locking in recent 
tariff reforms through lower bindings would 
significantly enhance the predictability of the trade regime. 
12. The application of internal taxes is 
both discriminatory and inconsistent:  the 
goods tax rate is 15% for imports but only 
10% for domestic goods, while imported beer, tobacco, and cigarettes are not subject to the excise duties levied on the same goods produced domestically. 
13. The Minister of Finance and Treasury 
has wide discretion in prohibiting imports, but the extent to which this power has been used is not clear.  Various statutes contain licensing requirements to protect health, safety, and the environment.  Solomon Islands does not have 
safeguard or anti-dumping and countervailing 
duty legislation, nor has it applied any contingency measures since its last Review. Solomon Islands WT/TPR/S/215 
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14. Although Solomon Islands' legal and 
institutional capacity to adopt and enforce technical regulations, conformity assessment procedures, and sanitary and phytonsanitary 
(SPS) measures remains weak, it has made 
considerable efforts in the SPS area, as reflected in the formulation of animal and plant import specifications, and the opening of a facility to conduct food tests.  The 
submission of relevant SPS and TBT 
notifications to the WTO would help to increase transparency for traders.  More generally, assigning greater priority to SPS and TBT activities would strengthen consumer protection and the capacity of local producers 
to compete in export markets. 
(4) E
XPORT MEASURES  
15. Solomon Islands levies export taxes 
on fish, minerals, and timber to generate fiscal revenue from natural resource production, 
encourage downstream domestic production, 
and help protect the environment.  Except for minerals, these taxes are assessed on the basis of a value determined by the authorities.  Given Solomon Islands' limited institutional capacity, export taxes provide a short-run 
means to capture economic rents from natural 
resource exports.  However, this goal is partly undermined by fraud and the authorities' undervaluation of timber values. 
16. Under authorizing legislation, the 
authorities have wide discretion to exempt 
export profits from income tax, but guidelines introduced in mid-2006 seek to reduce this discretion.  To qualify for the longest income tax exemption periods of five or six years, 
firms must export their entire output, or meet a 
50% domestic-value-added criterion.  Firms may also apply for a 150% deduction of export promotion and marketing expenses for income tax purposes. 
17. Apart from tax exemptions, there are 
no other official incentive schemes exclusively 
targeting exports.  Exporters have priority access to a loan guarantee programme maintained by the Central Bank.  There is an incipient institutional framework for export 
promotion. 
(5) O
THER MEASURES AFFECTING 
 T RADE  
18. To open a business in Solomon 
Islands, it is necessary to register, and to obtain a licence from the relevant provincial authority;  the process is complex and lengthy, and has become a major obstacle to entering 
the formal economy.  Ongoing efforts to 
review the business registration system are thus of great importance. 
19. There is no active enforcement of the 
few statutory provisions in place to prevent anti-competitive business practices.  Although 
the authorities are considering introducing new 
legislation, since the last Review of Solomon Islands there have been no concrete steps to strengthen the legal framework on competition policy.  Price controls apply on various 
staples. 
20. A range of tax exemptions are 
available to businesses.  Under authorizing legislation, the authorities have wide discretion in granting exemptions, but guidelines issued in mid-2006 call for their 
approval to be based on cost-benefit 
considerations.  Some income tax exemptions are granted on the basis of domestic value added criteria, while others are available for specific activities, including hotels, and 
agricultural and fisheries firms.  Transparency 
in this area has been significantly enhanced 
with the periodic publication of exemption reports by the Ministry of Finance and Treasury.  According to these reports, 
exemptions are significant.  Continued 
rationalization by reducing discretionary powers under authorizing legislation, would help address the fragile fiscal situation, and minimize distortions. 
21. State-owned enterprises are active in 
various sectors.  Their performance has been 
generally weak, which has translated into poor services and high prices.  The State Owned Enterprises Act, adopted in August 2007, WT/TPR/S/215 Trade Policy Review 
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seeks to address these problems, but its full 
implementation requires the reconstruction of state-owned enterprises' financial accounts, and the development of regulation. 
22. Solomon Islands is not a party to or 
observer under the WTO Government Procurement Agreement.  In general, central government agencies procuring goods and services, or conducting public works, must 
follow instructions issued by the Ministry of 
Finance and Treasury.  However, several official audits have revealed widespread non-compliance with these instructions.  More needs to be done to ensure that the Government acquires products and services at 
the best possible conditions. 
23. Solomon Islands has not adopted any 
legislation to implement the TRIPS Agreement.  The existing legal framework includes some provisions on copyright 
protection;  patents and trade marks registered 
in the United Kingdom are eligible for registration in Solomon Islands under statutes that predate independence. 
(6) S
ECTORAL POLICIES  
24. Agriculture is one of the largest 
economic sectors and a source of livelihood 
for most of the population.  The sector consists of small-scale production of subsistence and cash crops, and some large-scale plantations.  Available information suggests that assistance 
to the sector is limited, with current policy 
seeking to enhance extension and research activities.  The State has divested its equity in the main oil palm plantation and processing company.  Although a statutory body has 
broad powers regarding export marketing of 
various commodities, since 2002 its activities have been mainly limited to the enforcement of quality standards for copra and cocoa exports. 
25. Solomon Islands has significant fish 
resources.  However, weak sector governance 
and inadequate data collection on catches seem to pose risks to sustainability.  The main fish processing operation, which is majority-owned by the State, faces serious financial 
difficulties.  Foreign flag vessels represent the bulk of the commercial fishing fleet;  they must be licensed under one of Solomon 
Islands' plurilateral or  bilateral fisheries 
agreements, or participate in joint venture or domestic processing activities.  Fish exports are subject to taxes between 5% and 30%. 
26. Logging, which is carried out mostly 
by foreign firms, has been a key driver of 
recent economic growth, and makes essential contributions to exports and fiscal revenue.  However, logging exceeds the sustainable harvesting rate by at least a factor of three.  There is a pressing need for measures to 
ensure the long-term viability of production, 
which might require enhanced international cooperation to curb pressure groups and ensure that forestry policies and practices effectively reflect the national interest. 
27. Practically all mining production 
ceased in mid 2000 amid civil strife and land ownership disputes.  However, mining is expected to regain its former importance within a few years, and prospecting is on-going.  There are no statutory restrictions on 
foreign ownership of mining rights, except for 
alluvial mining permits, which are granted only to Solomon Islands citizens.  
28. The electricity market is a de facto  
state monopoly.  The system is unreliable and 
has limited coverage beyond the capital city.  
The authorities have taken steps to ease the critical financial situation of the state electricity company, and to improve its operations.  Although the legal framework 
does not limit private participation in the 
electricity market, it lacks clarity with respect to the applicable terms and conditions. 
29. Manufacturing is limited to a handful 
of activities.  Although sector assistance appears to be limited in absolute terms, some 
activities potentially receive significant 
effective protection due to the availability of import duty exemptions for qualifying inputs.  Under the Protected Industries Act, the State has the power to prevent the entry of new Solomon Islands WT/TPR/S/215 
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firms into particular industries on public 
interest grounds.  No information was available concerning the industries affected by this measure. 
30. Services represent around 40% of 
GDP, down eight percentage points from 2000.  During the period under review, deficits in services trade were generally posted in transportation, travel, and financial services.  
Solomon Islands scheduled commitments in 
only 29 of the 160 subsectors in the GATS.  It did not undertake commitments in the post-Uruguay Round negotiations on basic telecommunications or financial services.  There is ample scope for Solomon Islands to 
assume a greater number of GATS 
commitments in order to enhance the predictability of its legal framework, and in this manner help to address the concerns about instability that have undermined economic 
performance. 
31. There is significant foreign 
participation in the financial system.  Bank prudential indicators appear sound, and efforts have been made to strengthen the prudential framework and expand access to credit.  
Certain statutory restrictions affecting 
consumption abroad and cross-border trade of banking and insurance services appear to be at variance with Solomon Islands' GATS commitments, which fully bound market 
access and national treatment with respect to 
financial services delivered via those two modes of supply. 
32. Telecommunication services are 
supplied by a monopolist, resulting in 
unnecessarily high prices and low coverage.  
Moreover, the legal framework is outdated, and the institutional capacity to supervise the sector inadequate.  To address these problems, 
the Government intends to renegotiate the incumbent's exclusive licensing agreement, and to introduce a new legislative framework 
developed with external assistance. 
33. Maritime transport is key for Solomon 
Islands international and domestic trade, as the 
country consists of hundreds of islands.  Solomon Islands is open to international 
maritime service providers, but it does not 
allow foreign flag vessels to conduct cabotage of cargo or passengers.  Solomon Islands subsidizes certain domestic routes, considering that they cannot be operated on a commercial basis but are essential for social and economic 
reasons.  A statutory body manages and 
provides all port services in the two international ports.  Port charges on foreign flag vessels are higher than on domestic flag vessels. 
34. Solomon Islands adopted new civil 
aviation legislation in November 2008, as part of its efforts to foster a competitive and open market for air transport.  It has six bilateral air services instruments, and has signed, but not yet ratified, an agreement to establish a single 
aviation market in the Pacific.  The State owns 
the only national airline, which is in a weak financial position partly because it continues to service unviable domestic routes.  The country's only international airport 
(in Honiara) is owned and managed by the 
State. 
35. Few professional services are 
regulated in Solomon Islands.  Foreign professionals may provide legal, accounting, 
and architectural and engineering services as 
long as they obtain work and residency permits.