Antonina Shanta Sikalu (s11152260)

EC304 Assignment Essay 1

Every Nation’s ambition and vision is to improve the standard of living of its people and
accommodate a greater well-being for all. The wealth and resources of a country, especially in
terms of population and consumption of goods and services is declared as the economy of that
country. And the increase in the amount of goods and services produced per head of that
country’s population using the available resources in hands are referred to as “economic
growth”. [ CITATION Kim19 \l 1033 ]. This writing is aiming to specify the difference between
economic growth and economic development which will lead to the discussion of how
economic developments are measured using the Kingdom of Tonga as an example. And last but
not the least; it will summarize how sustainable development goals affect the Kingdom of
Tonga’s Development.

Economic Growth causes Economic Development and it is necessary but however not a very
sufficient condition as it is just a narrower concept than economic development. [CITATION
Red20 \l 1033 ]. Economic Growth is a monetary value of the goods and services produced by a
country (Tonga as an example) in a period of time, which can be caused by an increase in the
quantity and quality of resources and by improvements in technology. It is a phenomenon of
market productivity and rise in Gross Domestic Product (GDP). Whereas Economic
Development is a policy intervention aiming at the improvement of the well-being of people.
[ CITATION Red20 \l 1033 ]. Therefore, economic growth is one aspect of the process of economic

development. When level of production is increasing along enrichment of living standards and
the advancement of technology, that country’s economy is maximizing economic development.
Where there is improvement in standard of living, there is economic development and by
saying “improvement in standard of living” that means higher levels of education and literacy,
worker’s income, health and life expectancy. According to Michael Todaro, economic
development is define as the increase in people’s standard of living, improvement in self-
esteem needs and freedom from oppression as well as greater choice. [ CITATION Red20 \l 1033 ].
To add on, economic growth does not take into consideration any economic activities that takes
place in the black market. Those activities are not recorded such as buying and selling of drugs
and other goods that are trade secretly, while economic development does. For example, a
construction worker in Tonga engages in the informal economy if he takes payment cash and
does not report it on his taxes. The construction work is legal but the tax avoidance is not. This
does not record in economic growth but it measures economic development as it alleviates that
construction worker from low standard of living.[ CITATION Red20 \l 1033 ].
As expected economic development is not the same with economic growth. As shown in the
textbook, economic growth talks about a rises in the Gross Domestic Product per capita.
However, economic development is more than that. It is not just about an increase in the GDP
instead, it involves other bigger issues such as structural changes, decline in fertility rates, lastly
higher consumption, and economic welfare. [ CITATION Dwi12 \l 1033 ]

Kingdom of Tonga lies at the west of the South Pacific Ocean, on the western side of the
International Date Line, 650km away from Fiji to the West, 1,770km away from New Zealand to
the Southwest, and it has a history of more than 3000 years. The Kingdom of Tonga is
composed of 172 islands, 36 of which are inhabited and Tonga has 6 islands group which are
Tongatapu, Vava’u, Ha’apai, ‘Eua, Niuatoputapu and Niuafo’ou ranging from biggest to smallest
in land size. Tonga Statistics Office has released the Population Distribution by Island Division,
Preliminary Result 2011 showing that national population reaches 103. [ CITATION The17 \l 1033 ].
The Kingdom of Tonga’s geography is what determine its development opportunities and
constraints.
Tonga is the last constitutional monarchy among the Pacific Islands and it has an open
economy. Tonga’s economy relies heavily on remittances from families and friends who are
residing overseas mainly in Australia, New Zealand and the United States and is continuously
depending on that foreign aids and remittances to offset its trade deficit. Much of the
monetary sector of the economy of Tonga is dominated, either by the Royal Family or by
nobles. Economic Development is importantly vital in Tonga. This is because, it is the process of
improving the economic well-being and quality of life of people by building local wealth,
diversifying the economy, creating and retaining jobs, and building the local tax base. The most
accurate method of measuring development is the Human Development Index (HDI). The HDI is
a composite indicator that includes life expectancy rate, adult literacy rate, school enrolment
rate and GNP per capita. In a simple definition, life expectancy refers to the statistical measure
of the average period of time that a person may expect to live. (World Health Organizations,
2019).

Life Expectancy for Tonga

71
70.95
70.9
70.85
Life Expectancy

70.8
70.75
70.7 Life Expectancy
70.65
70.6
70.55
70.5
70.45
2017 2018 2019 2020
Years

Source: https://www.macrotrends.net/countries/TON/tonga/life-expectancy

From the above graph, it shows that the life expectancy for Tonga increase over the year. This
proves that there is advancement in the economy of Tonga nowadays than it was in the
previous years. Tonga is investing in its people by assuring them a healthy life through modern
technology, as there is a development in the economy.
HDI is also a composite of education dimension (school enrolment rate and adult literacy rate)
measured by mean of years of schooling at the age of 25 or more, and expected years of
schooling for children of school entering age. The last composite to be discussed is the standard
of living in which it is measured by gross national income per capita. The HDI uses the logarithm
of income, to reflect the diminishing importance of income with increasing GNI. [ CITATION Uni19
\l 1033 ]. The table below shows the Human Development Index in Tonga from 1990-2018
according to the United Nation Development Programme (UNDP)
Table 1 : Tonga HDI from 1990-2018
 YEAR HDI YEAR HDI
1990 0.645 2005 0.674
1991 0.651 2006 0.675
1992 0.653 2007 0.678
1993 0.657 2008 0.681
1994 0.664 2009 0.686
1995 0.667 2010 0.692
1996 0.667 2011 0.696
1997 0.667 2012 0.700
1998 0.670 2013 0.699
1999 0.670 2014 0.699
2000 0.666 2015 0.714
2001 0.670 2016 0.715
2002 0.676 2017 0.717
2003 0.685 2018 0.717
2004 0.674
Source:  http://hdr.undp.org/en/content/human-development-index-hdi

As seen in Table 1 : Tonga HDI from 1990 to 2018 had been slightly increase from time to time
which illustrates the GNI, the health care and the standard of living were slightly increasing as
well.
According to a case study found about Tonga, in order for Tonga to neutralize and maintain
economic development, they set up the Tonga’s seven five-year plans (1966–2000). This is to
monitor and keep track of economic infrastructure development, replenishing copra and
banana industries to improve agricultural production, access to more advances
telecommunications and quality transport, and expansion of tourism, industry, and exports. In
the year 2001, Tonga commenced on its seventh strategic development plan (SDP7) for 2001–
2003. The purpose of the seventh strategic development plan (SDP7) is to improve the standard
of living for all Tongans with the thoughts of achieving this via policy initiatives in five areas.
These include currency stabilization, privatization, updating and restructuring of the operations
of state-owned enterprises (SOEs), and maintenance and improvements in the infrastructure
and environmental protection. Early 2002, Economic and Public Sector Reform Program (EPSRP)
was accepted by the Cabinet and declare the economic and fiscal objectives. The EPSRP’s three
core objectives are supporting public sector reform continuously such as the private sector
promotion as the engine of growth, sustainable environmental management and equitable
social development. [ CITATION Nat20 \l 1033 ].
Moreover, another difference between economic growth and economic development not
mentioned above is that economic growth does record the reduction in the quantity of natural
resources that will later on results on pollution, congestion & disease. On the other hand, the
development of the economy concerned with sustainability by satisfying the needs of the
present without raising any concerns about the future needs. These environmental effects are
however pressuring Governments because of Global warming. [ CITATION Red20 \l 1033 ].
To overcome these environmental effects, sustainable development goals enter trial or put into
use. Sustainable Development refers to the practice of economic development that does not harm the
natural resources that may results in gradually decrease of its quantity. It is the 17 global goals
adopted by countries and put together to accomplish the “2030 Agenda”. These global goals
included escaping poverty, zero hunger, good health, quality education, gender equality,
economic growth and other goals. These goals were designed to alleviate poverty, to build a
better world for people and our planet to have peace and prosperity, now and into the future.
With references to the Voluntary National Review report of Tonga, Indeed, the 17 SDGs have
positively influenced the development of economy in Tonga.
“Tonga amended the SDGs and targets to national circumstances and systems and aim
to improve the integration of the three dimensions of sustainable development.
Dedicated stakeholder consultations including civil society partners were gathered to
adjust SDG’s into Tonga’s national systems, as well as, localize the SDG indicators and
establish a tailored monitoring system.” [ CITATION Nat19 \l 1033 ].

Sustainable Development have positive impact upon Tonga’s Development as it aids to

achieving Tonga’s vision of developing and promoting a just, equitable and progressive society
in which the people of Tonga enjoy good health, peace, harmony, and prosperity, in meeting
their aspirations in life. With adherence to Tonga longstanding cultural and traditional values on
sustainable development, they aim to achieve their national priorities in durable partnership
with key stakeholders.
To conclude with, despite the differences between economic growth and economic
development, these two goes together. When there is a growth in the economy, there is likely
to be an economic development as well. The Sustainable Development Goals help sustaining
and maintaining both the economic development and the economic growth. However, it is
acknowledged that reaching the SDGs by 2030 is a challenge for all, and that the journey is long
mindful of the capacity and resource constraints a country face.

ACRONYMS
 GDP – Gross Domestic Products
 GNI – Gross National Income
 HDI – Human Development Index
 UNDP – United Nation Development Programme
 SDP7 – Seventh Strategic Development Plan
 SOEs – State-Owned Enterprises
 EPSRP – Economic and Public Sector Reform Program
 SDGs – Sustainable Development Goals
References
Amaded, Kimberly. 2019. the balance. December 23. Accessed March 5, 2020.
https://www.thebalance.com/what-is-economic-growth-3306014.

Commonwealth, The. 2017. The Commonwealth. Accessed March 7, 2020.

https://thecommonwealth.org/our-member-countries/tonga.

Division, National Planning. 2019. "Sustainable Development." Kingdom of Tona- Voluntary National
Review 2019. Accessed March 7, 2020.
https://sustainabledevelopment.un.org/content/documents/23588Kingdom_of_Tonga_Volunta
ry_National_Review_2019_Report_web.pdf.

Dwight Perkin, David Lindauer, Steven Radelet. 2012. Economics of Development. New York: W.W.
Norton & Company.

Encyclopedia, Nations. 2020. "Nations Encyclopedia." Tonga- Economic Development. Accessed March 7,
2020. https://www.nationsencyclopedia.com/ Asia-and-Oceania/Tonga-ECONOMIC-
DEVELOPMENT.html.

Programme, United Nation Development. 2019. "United Nation Development Programme." Human
Development Reports. Accessed March 7, 2020. http://hdr.undp.org/en/content/human-
development-index-hdi.

Reddy Uday, James Mania, Pooja Sehgal. 2020. "Diffen." Economic Growth vs. Economic Development.
March 8. Accessed March 4, 2020.
https://www.diffen.com/difference/Economic_Development_vs_Economic_Growth.

Websites
https://www.nationsencyclopedia.com/Asia-and-Oceania/Tonga-ECONOMIC-
DEVELOPMENT.html#ixzz6Fxxp2LS5
https://www.macrotrends.net/countries/TON/tonga/life-expectancy