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Falkland Island Economy
 
 
 

General

The economy of the Falkland Islands, previously heavily over-dependent on sheep farming (and historically whaling), has become more diversified in the last decades and now also has income from tourism and commercial fishing as well as a service base for the fishing industry. The Falkland Islands have the highest standard of living in South America. The islands use the Falkland pound, which is tied to sterling.

The largest company in the islands used to be the Falkland Islands Company (FIC), a publicly quoted company on the London Stock Exchange. The company was responsible for the majority of the economic activity on the islands, though its farms were sold in 1991 to the Falkland Islands Government. The company now operates several retail outlets in Stanley and is involved in port services and shipping operations.

Farmland accounts for 4,339.73 sq mi (1,123,985 hectares), more than 90% of the Falklands land area. Since 1984, efforts to diversify the economy have made fishing the largest part of the economy and brought increasing income from tourism. Sheep farming was formerly the main source of income for the islands and still plays an important part with high quality wool exports going to the UK: according to the Falklands Government Statistics there are over 500,000 sheep on the islands with roughly 60% on East Falkland and 40% on West Falkland.

The government has operated a fishing zone policy since 1986 with the sale of fishing licences to foreign countries has bringing in more than £40 million a year in revenues. Local fishing boats are also in operation. More than 75% of the annual catch of 200,000 long tons of squid, and most exports are to Spain.

Tourism has grown rapidly. The islands have become a regular port of call for the growing market of cruise ships with more than 36,000 visitors in 2004. Attractions include the scenery and wildlife conservation with penguins, seabirds, seals and sealions, as well as visits to battlefields, golf, fishing and wreck diving.

An agreement with Argentina had set the terms for exploitation of offshore resources including large oil reserves as it was thought that there might be up to 60 billion barrels (9.5 billion cu m) of oil under the sea bed surrounding the islands. However, in 2007 Argentina unilaterally withdrew from the agreement. In response, Falklands Oil and Gas Limited has signed an agreement with BHP Billiton to investigate the potential exploitation of oil reserves. Climatic conditions of the southern seas mean that exploitation will be a difficult task, though economically viable, and the continuing sovereignty dispute with Argentina is hampering progress. In February 2010, exploratory drilling for oil was begun by Desire Petroleum, but the results from the first test well were disappointing. As of 8 May 2010, the commercial viability of the 174-foot (53 m) oil bearing strata had yet to be established.

Overview

Economy - overview :
The economy was formerly based on agriculture, mainly sheep farming, but today fishing contributes the bulk of economic activity. In 1987, the government began selling fishing licenses to foreign trawlers operating within the Falkland Islands' exclusive fishing zone. These license fees total more than $40 million per year, which help support the island's health, education, and welfare system. Squid accounts for 75% of the fish taken. Dairy farming supports domestic consumption; crops furnish winter fodder. Foreign exchange earnings come from shipments of high-grade wool to the UK and the sale of postage stamps and coins. The islands are now self-financing except for defence. The British Geological Survey announced a 200-mile oil exploration zone around the islands in 1993, and early seismic surveys suggest substantial reserves capable of producing 500,000 barrels per day; to date, no exploitable site has been identified. An agreement between Argentina and the UK in 1995 seeks to defuse licensing and sovereignty conflicts that would dampen foreign interest in exploiting potential oil reserves. Tourism, especially eco-tourism, is increasing rapidly, with about 30,000 visitors in 2001. Another large source of income is interest paid on money the government has in the bank. The British military presence also provides a sizeable economic boost.


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