Cook
Islands Geography
The Cook Islands are a widely scattered group
of islands located in the south-east Pacific
Ocean approximately half way between New Zealand
and Hawaii with a total land area of 241 sq
km.
Geologically
they can be subdivided into 2 distinct groups.
The southern Cook Islands compromise Raratonga
which is volcanic in origin, Aitutaki which
is volcanic coral and Atiu, Takutea, Mauke,
Mitiaro and Manuae which are all raised coral
atolls. The northern Cook Islands which comprise
Penrhyn, Manihiki, Pukapuka, Palmerston, Rakahanga,
Suvorov and Nassau are all low coral atolls.
The
main administrative and commercial center is
the capital city Avarua on the island of Raratonga.
The climate is tropical, moderated by trade
winds. Whilst rainfall averages 2000mm per annum
on the mountain slopes of Rarotonga much drier
conditions prevail further north. The Islands
are lashed by typhoons from November to March.
The Islands are 10 hours behind Greenwich Mean
Time. Direct daily flights are offered by Air
New Zealand from Rarotonga to Los Angeles, Auckland,
Fiji, Tahiti and Honolulu. Telecommunications
are excellent.
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Cook Islands Population,
Lanuage and Culture
In
1595 the Spanish navigator Alvaro de Mendala became
the first European to sight the Cook Islands;
the Portuguese landed on them in 1606. The Russians
named the Islands the Cook Islands after Captain
James Cook who made 3 trips there between 1773-7.
The Islands became a British Protectorate in 1888
and were annexed to New Zealand in 1901. In 1965
they became self governing in a free association
with New Zealand from which they require support
only in external affairs, defence and finances.
The
Cook Islanders are Polynesians who are closely
related in tradition, language, culture and customs
to the Maoris of New Zealand. Although English
is the official language Maori is also spoken.
British missionaries ended cannibalism and made
Christianity the predominant religion.
However
Western occupation was accompanied by Western
diseases which so devastated the indigenous population
that by 1850 there were less than 2,000 inhabitants.
In 2006 the population of the Islands was estimated
to stand at approximately 21,400 people with a
low annual population growth rate.
In
the 20th century it is economic difficulties and
not disease which has kept the population low,
with large numbers of Cook Islanders emigrating
to New Zealand in search of employment.
Cook
Islands Government
The Cook Islands are a self governing parliamentary
democracy. The Islands have a prime minister,
a cabinet, and a legislative assembly whose 25
members are elected every 5 years, most recently
in September, 2006. Additionally the traditional
tribal chiefs( the "Ariki") have their own house
of representatives where they consider matters
submitted by the legislative assembly.
The
seat of Government is at Avarua, the capital town
located on the Island of Raratonga. The Queen
of England is the head of state in her capacity
as Queen of New Zealand and New Zealand has a
High Commissioner on the Islands. The Prime Minister
is Jim Marurai(since 14 December 2004); The Deputy
Prime Minister is Terepai Maoate (since 9 August
2005).
The
legal system is based on English common law and
equity. Since 1965 the Islands parliament is sovereign,
meaning that it must approve and pass all new
laws. The superior court of record is the High
Court of the Cook Islands. From there appeal lies
to the Court of Appeal and thereafter to the Privy
Council in England. Legal services are provided
by local and New Zealand lawyers.
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Cook Islands Economy
and Currency
Both the New Zealand dollar and the local Cook
Islands currency are legal tender on the Islands,
with an exchange rate of around US$1 = NZ$2.35.
The
Cook Islands geographic isolation and their lack
of natural resources have hindered the Islands'
economic development. Most goods have to be imported
and there is little to export in return: in 2000
exports stood at US$9m against imports of US$50m.
Remittances from emigrants bridge only some of
the gap and there is substantial external debt.
Government
profligacy led to a declaration of 'bankruptcy'
in 1996. The impact of this default has been substantial
and has created a negative international perception.
Under pressure, the Government cut its workforce
and costs by more than 50%, and sold assets. It
has tried to expand the mining and fishing industries,
and to encourage tourism, but the drain of economic
migrants to New Zealand fleeing the dire local
situation added a further difficulty.
Agriculture provides exports of copra and citrus
fruit. Manufacturing activities are limited to
fruit processing plants and some clothing factories.
Other exports include fish, jewellery, handicraft
and mother of pearl shell. Trade is dominated
by New Zealand with regular shipping connections
from the port at Avarua.
By
2003, the government's efforts had borne fruit
and the Islands' Finance Secretary at the time,
Kevin Carr was able to announce that taxation
revenue had almost doubled in the jurisdiction
over the previous five years.
Citing
tourism, the pearl industry and the fishing sector
as the driving forces behind the economy of the
Cooks, Mr Carr also reported a 1.5% increase in
economic growth, and predicted that the Islands
could achieve growth levels of 3.2% per year in
the long-term. Tourist arrivals in 2003 at 78,000
were up from 72,000 in 2002. The budget for 2004/2005
maintained a fiscally responsible strategy.
GDP
grew by 3.4% in the 12 months to June 2004 and
remained firm in the quarters to September and
December as tourist arrivals rose and building
activity picked up. Preliminary data suggested
that total visitor numbers increased by 6% in
2004. However, fror the first 9 months of 2004,
pearl exports were 28% below their value for the
same period of 2003.
Inflation
was low at 0.3% in 2004. The solid economic conditions
helped further improve the fiscal position over
the year. Revenues from the four main taxes (VAT,
income tax, import duties, and company taxes)
were 9% higher than in the previous year.
GDP ran at about US$5,000 per head. In 2005, it
was estimated at around $9,100.
The
overall improvement in the fiscal position was
recognized in October 2004 by Standard & Poor’s,
which raised the long-term rating to BB- from
B+. This is the fourth upward revision to the
rating since an initial B-/C rating was assigned
in 1998. However, the Cook Islands was put on
credit watch in early 2005 because of the threat
to the economy from cyclone activity.
The
2005/2006 budget recognized difficulties caused
by cyclones early in the year.
"There is evidence that the economy contracted
in the March quarter of this year. There are some
signs that the economy was slowing even before
the cyclones. Moreover, the five cyclones that
hit the country in February-March had a major
short-term effect on the economy," said the Minister
of Finance.
The
minister continued: "Economic growth in 2005-06
will be lower than it would have been without
the cyclones. The budget is premised on real growth
of 2.4% in 2005-06, slightly below the long-term
trend growth rate of around 3%."
The
budget foresaw an operating surplus of $3.4m.
GDP growth was estimated at 0.1% (2005).
Tax
figures for early 2007 revealed that that Gross
Turnover revenue for the quarter to March was
$118.1 million for all industries in the Cook
Islands. This was a decrease of 13.2% when compared
to the previous quarter but an increase by 5.8%
when compared to the March quarter 2006.
Total
Value Added Tax (VAT) collected on Sales and Income
was $13.1 million for the Cook Islands in the
same quarter. The Wholesale & Retail Trade
continued to contribute the highest VAT collected
on Sales and Income with 37.7%, followed by Hotels
& Motels at 16.2% and Transport & Communication
at 14.1%
Net
value added tax (VAT) for all industries was $5.9
million for the first quarter of 2007. This was
a decrease of 23.3% when compared to the previous
quarter, but an increase of 8.4% when compared
to the same quarter of the previous year.
The
offshore sector started early with various pieces
of legislation in 1981/82, and despite its small
absolute size is the second biggest contributor
after tourism to Government finances. See Offshore
Business Review for further details.
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Cook Islands Entry and Residence
The Entry, Residence and Departure Act 1977 states
that anyone other than a Cook Islands citizen
or permanent resident who wishes to live and work
on the Islands must first obtain a work and residence
permit. An application for a work and residence
permit can now be made online.
Formal
unemployment is low and there is a shortage of
skilled and qualified workers in both the public
and business/private sectors. Where qualified
local persons are not available to fill a position,
the foreign investor may recruit from overseas.
For
short-term entry, passport, proof of sufficient
funds, and onward/return ticket are required.
For many nationals, a visa not needed for visit
up to 31 days.
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Cook
Islands Business Environment
Business licenses are required to operate domestically,
but not by offshore companies. Certain domestic
activities are reserved to Cook Islanders.
Unless
the entity falls within one of the stated exceptions
the general rule is that all foreign companies
or organizations that wish to set up a commercial
operation in the Islands must first obtain approval
from the Government and register their planned
activities. A foreign enterprise is a business
of which more than one third of the equity is
owned by foreigners.
The investment code strongly encourages joint
venture participation with Cook Islanders but
this requirement will be waived where such participation
is not a practical proposition.
The
full text of the Investment Code 2003 can be found
here.
Under the Leases Restrictions Act 1976 a foreigner
may lease land for up to 5 years without obtaining
special permission. A foreigner wishing to lease
land for more than 5 years needs to obtain the
approval of a Government committee set up under
the Act. A foreigner cannot lease land for more
than 60 years and is forbidden from owing a freehold.
A foreigner is defined as anyone who is not a
permanent resident or a citizen of the Cook Islands.
Confidentiality
is tight in the Cook Islands. The offshore registries
are not open to a search by the general public
and may be searched only by persons showing to
the registrar a good and cogent reason for doing
so. Fraud constitutes one such reason. Although
under the International Trusts Act 1984 an International
Trust must be registered annually for the first
5 years after its creation the registration requirements
do not include disclosure to the registry of the
names or details of the beneficiaries or settlor
or the provision of a copy of the trust deed setting
out the terms under which property was settled.
Likewise under the International Companies Act
1981 a company is not required to file details
of the beneficial owners either at the date of
incorporation or in any subsequent annual returns.
Government officials and the employees of banks,
insurance companies, trust & corporate entities
are compelled to observe secrecy and failure to
do so leading to an unauthorized disclosure will
result in penal sanctions. There are some exceptions
where criminal activity is involved, but this
does not include fiscal crime.
From
July 1, 2006, the government has lifted most import
levies, although pork, fresh fruit and vegetables,
pearls and soft drinks were added to the original
'big four' list of exceptions - motor vehicles,
liquor, tobacco and fuel - in order to allay fears
that the move would have too big an impact on
government revenues. However, import duties on
the items added to the list will be cut by 50%
on July 1, 2008. Further reductions will be subject
to review.
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Cook Islands Import of Foreign
Capital
There are no exchange controls in the Cook Islands.
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Cook Islands Investments by
Foreigners
The Development Investment Act of 1977, administered
by the Cook Islands Monetary Board, is regarded
as the basis for all incentives and concessions.
Under the Act, any foreign enterprise (i.e, one
with less than 66% local shareholding) must apply
to the Monetary Board (in effect the Cook Islands
Cabinet) to establish a new business. An Investment
Code issued in 2003 (see above) lists the areas
in which investment is restricted as well as those
in which it is encouraged.
Foreign
inward investment is generally encouraged. Incentives
and concessions are available where the Government
believes the investment will contribute significantly
to the development of the Cook Islands and include
such measures as:
-
the imposition of tariffs on competing imports;
-
tax relief by way of an accelerated depreciation
allowance on capital goods;
-
exemptions from customs duty and import levy;
- permission
to lease land;
- work
permits;
-
tax concessions;
-
training incentives, including allowances for
the training and recruitment of Cook Islanders
who are living abroad.
In addition to these incentives, the Government
heavily encourages joint ventures with the indigenous
population, and the Development Investment Code
identifies desired investment sectors where the
Government has deemed that development by potential
overseas investors is desirable for the economic
development of the Cook Islands. These areas do
not necessarily attract incentives, however they
are encouraged and welcomed by the Government.
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