Economy

Strategic assets

For 30 years the island has obtained substantial subsidies that enabled it to experience high growth, driven by strong consumption and fueled by retrofitting of social minima. This growth rate is between 4 and 7 %. This is a remarkable performance that well mask the realities. It implied a profound structural transformation of the society and the economy. The politicians have not achieved this challenge inspite of this “windfall”…

With a stable democratic and institutional framework (under certain conditions), with wider competences (for better or worse), Reunion Island has the keys of its destiny.Time is becoming limited for it to develop a relational regional and international environment, and to find new avenues for growth and development for the post “Sugarcane”.

In the short run, subsidies will stop and the situation may be painful.

Economy

Contents: Agriculture – Fisheries – The secondary sector – Tourism – Trade – Craft – Employment – Regional cooperation

If the cane-sugar-rum- bagasse sector is still today an essential activity, diversified activities are now experiencing continuous growth. Indeed, the service sector is becoming increasingly important, almost three quarters of the workforce now work in the tertiary sector, particularly in the services and commerce. Diversified activities that have emerged in the recent years are in the agricultural sector concerning vegetable and fruit production, the secondary export crops (geranium, vanilla, tobacco…), meat – milk industry. At industrial level, the growth has mainly benefited the food and the construction industries. Activities in these sectors benefit from undeniable strengths: the importance of the internal market, significant public support in housing and, through structural programs in public works (roads, infrastructure …), protection of local production against competition (dock dues). Tourism is on its progression (a high quality tourism in the west, a discovery tourism in the heights, a popular tourism of local clientele). Finally, the top tertiary sector, including the sale of services throughout the training development, the engineering and the studies offices, offer strong potential related to the needs of the general economy of the area. GDP advanced to 1.2% in 2011. We are far from the strong growth oscillating between 5 and 7% experienced by Reunion Island in recent decades. The GDP per capita is however still at a stage twice less than its average European level. Consequently, the labour market which had experienced during the last decade a major boom with annual growth of 2.5 %, resulting in the creation of 3,900 net jobs in 2013 has increased by 1.4 %. These creations do not therefore absorb the flow of jobseekers with 56.2% of young people from 15 to 24 are concerned. Indeed, Reunion Island is experiencing a diminishing job offers by 1.2% and account therefore in 2013, 163,460 unemployed people and 110,267 RSA beneficiaries. Therefore, 36.7% of the Reunion Island population is benefiting from this service which represent one over three islanders. The amount of allowance for the department itself amounts to 529.9 million euros. This overall trend was also accompanied by the transfer of staff enjoying the most promising branches of the service and to a lesser extent industry. The state’s expenditures in 2013 represent 5.55 billion euros. In 2012, the expenses of the region of Reunion Island amounted to 766 million euros of which 42% is awarded where 318 million euros is for its operation. In 2012, the region of Reunion Island shows a year before the loss carryforward result. The deficit amounted to 61.2 million euros, which is up to 45 million euros compared to year 2011. The result after the transfer remains in surplus by 157.7 million euros, although it decreased to 28.0% on a year. The state has allocated 459,181,657 euros to the General Council in 2013 with operating expenses representing 85 %. Reunion Island is classified by Europe in the category of less developed regions and has as such an objective of operational development program No. 1 (RDP III).

Agriculture

In 2010, 7,620 farms are located in Reunion Island with a utilized agricultural area representing only a fifth of the territory in 2010 against 25% in 1989 (54.3% in France). Agricultural production is divided into 3 positions of comparable economic importance: – Sugar cane and other industrial plants (€ 134 million in 2012) – Fruits and vegetables (147 million euros in 2012) – Meat and livestock products (€ 118 million in 2012). The sugarcane culture occupies a prominent place in the agriculture of Reunion Island. More than half of the agricultural area are devoted to it, that is 23 400 hectares or 60% of arable land. Sugar factories and distilleries on site are transforming the cane harvest respectively in sugar and rum. Sugar production is around 200,000 tons. After doubling in 1993, Reunion rum production reached in 2000, 80 800 hectolitres of pure alcohol (PAHs). Sugar exports accounted for 77 million euros in 2012 or 40% of food exports. The other traditional agricultural products are vanilla, perfume oils (geranium, vetyver, ylang-ylang). The economic importance of these traditional cultures inexorably declined for many years. Next to this industry, we assist for the past 20 years to a diversification of production, including breeding, soilless cultures and market gardening. The livestock sector, especially pig and poultry, mark the success of the cooperative movement of the islanders. Livestock farming has developed itself and provided in 2013, 180,968 hl of milk (80.000 hl in 1992), 12 169 tonnes of pig meat and 1,768 tonnes of beef in 2012. Its development continues with a policy of pastures in altitude, including the development program of the heights of Reunion Island where lies one fifth of the population of the island and where agricultural, pastoral and forest activities multiply.

Fishing

Still very marginal in 1980, this permanent change in activity is affirming and modernizing itsdelf. – Artisanal fishing: – with the small fishing (less than 24 hours trips) represented in 2011 the largest activity with 191 ships and 255 sailors. (37% of sales). – Inshore and offshore fishing: 23 vessels, 262 sailors – swordfish (64% of their turnover). And fishing off the coast called Industrial fishing: 7 vessels, 282 French sailors, and 60 million € turnover of toothfish. The SAMPER realized in 2013, 91.6 million euros of turnover – Second export product (after the sugar, rum and perfume essences), fishing represented 66 million of exports and catches of 4,800 tons in 1995 to 7,550 tons in 2000. The coastal fishing is low due to the absence of the continental shelf around the island. However, offshore industrial fishing, especially the lobster on the outskirts of Saint-Paul and Amsterdam Islands, as well as the industrial fishing, currently practiced by the three arms based in the Reunion Island involved in the redeployment of the activity on the zone of Kerguelen where Reunion Island constitute of the rear base. The southern fishing thus represented in June 2012, 30.1 million euros. The Reunion Island has also a fish storage activity (tuna and other species), addressing in particular fishing the tuna of the Asian longliners.

The secondary sector

The industrial sector of Reunion Island is characterized by: – A food industry in a leading position with 60% of food sales of DOM and half of the manpower devoted to this sector. The food industry of Reunion Island is the first industrial sector of the Island with 38% of its turnover representing 1,028 million euros and 32% of employment. It consists primarily of the sugar industry and the industry of meat and milk. – A manufacturing industry, which includes more than three quarters of industrial companies and represents 51% of overall turnover. It consists of companies of intermediate goods, capital goods and consumer goods. In 2010, the turnover of the industrial sector accounted for 1,161 million euros.

Tourism

The tourism sector contributes to an increasing share in the economy of Reunion Island. In the first semester of 2013, 190,000 tourists visited the country, a level close to 2009, but down by 10 % compared to the first semester of 2012. It remains however the “leading” activity of the Island. Reunion Island schematically has three basins hotels locations: – The region of Saint -Denis welcomes mainly business tourism customers: 55.9% (overnight stays) -The Western Region, facing seaside tourism (62.7 % of overnight stays) -Regions of the heights and south have a strong proposal of villas characterized by a hotel infrastructure of low density and small hotels, which are turning to tourists and residents (48.4 % of overnight stays). In 2014, Reunion Island had 59 hotels and tourist homes classified with a capacity of 2,850 rooms. In addition of the classified hotels, there are also two holiday villages (700 beds) plus unclassified hotels or homes (1,500 beds). Accommodations in cottages, steps, mountain, in furnished guest rooms approached the 700 establishments for 2,800 beds. This hosting is mainly present in the south and on the heights. The four major marinas accommodate more than 1,200 boats that allow the stay and the nautical activities. Reunion Island hosted 432,000 tourists in 2013, representing an increase in attendance of 1.4 % for a recipe of 349.50 million euros making it the “business leader” of the island. This department has, indeed, a very diverse tourism potential between sports and water sports (including the deep sea fishing), flying clubs, mountain stays in the cottages of the heights of the Reunion Island, visiting the cirques formed in the craters of extinct volcanoes and that in Piton de la Fournaise volcano (2,631 meters). The multiplicity of local cuisines (Chinese, Creole, Indian and French) offered by the island’s restaurants is an additional benefit which is not immune to visitors.

Read more: Tourism Committee of Reunion www.reunion.fr

The tourism is one of the new engines of economic growth of Reunion Island. It is for the island activity with strong potential for value creation and employment, producing moreover significant spillover effects on other economic sectors, the local development and the enhancement of the territory. The many tourist attractions from which beneficiate Reunion Island have led the local players to set through the “Touristic Development and Planning Scheme of Reunion Island” (SDATR), the strategic directions of the development of the Reunion Island’s destination.

The success of tourism development requires action on:

• Meeting the destination’s marketing policy to:
• diversify external customers, targeting in particular clientele niches in foreign markets identified as priorities at the SDATR (Germany, Switzerland, Belgium) and those having with a direct air service with Reunion Island destination. Develop the programming with the prescribers (TO) and their marketing networks.
• reinforce the metropolitan market by promoting new products and marketing approaches and strengthen the geographic approaches and the customer segmentation.
• increase local tourism consumption by developing and promoting specific offers for domestic customers.
• assess and monitor the impact of tourism on the island’s economy.
• improve knowledge of the market and forecasts of tourism activities.
• anticipate the rapid changes in the sector and adapt the marketing strategy.
• dispose of the evidence on the balance between supply and demand improved monitoring and observation to the tourist: Reunioneurope.org

Commerce

Trade is positioned as the first economic sector of the department after the market services. In recent years, improved household purchasing power, favored mainly by the progressive and rapid implementation of the minimum wages of the overseas departments on that of France, has fully benefited the commercial enterprises and especially the medium and large surfaces.

Craft

34% of Reunion companies and 15% of the workforce employed in the department work in the artisanal sector.

Employment

With a total population estimated at 843,617 inhabitants in 2015, where nearly 32.2% have less than twenty years, the population growth of the Reunion Island appears four times higher than in France. This phenomenon is combined with the change in social behavior, such as the development of women’s work, resulting in a sharp increase in the workforce of the department. This has a decisive influence on the level of unemployment to the extent that the demand for labour of many generations entering the job market cannot be completely satisfied despite the economic expansion. Employment is the key challenge for economic development of the island. This analysis confirms the need to achieve more voluntary the proposal formulated in early 1992 to promote the creation of new export-oriented activities. It is now to strengthen the economy’s openness policy initiated in 1994. Encouragingly, however, the unemployment rate stabilized at 29%. According to the employment estimates by INSEE, the total number of jobs in the Reunion amounted to 250,127 at 31 December 2012. The island’s economy has created about 3,900 net jobs in 2013, against 3100 created in 2012. The employment rate of 15-64 years increased by 0.3 point to 44.0%, the corresponding total population increased at a slightly faster pace than the number of employed people. For comparison, the employment rate is 63.9 % in France.

Read more: Broadcast Institute of Overseas Departments: IEDOM – National Statistics Institute of Economic Studies: INSEE Regional Cooperation.

In this area, the Reunion Island is an original example, since the effect of France has acceded, there are more than fifteen years, the Indian Ocean Commission, under its department located in the area of the Indian Ocean. This translates to a specific device resulting from the presence of France in an intergovernmental organization with ACP States.

Regional cooperation is likely to constitute a real asset, be it the economic development of the Reunion Island or diplomatic relations of France with respect to the Indian Ocean rim countries.

Economic landmark

2006 data:

GDP per capit	(PNB 2006): $ 17 900
GDP per capita PPA	$ 13,170
Distribution of GDP:
Primary	8%
Secondary	19%
Tertiary	73%
Inflation
Invest.int.brut
IDE
Exports	0.298 Billion
Imports	Imports Billion
Resources	fishing, arable land , hydropower
Country risk	01-Jun
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