New Caledonia, or, as it is known to the indigenous Kanaks, Kanaky, is an island group 400 km (250 miles) west of Vanuatu and 1350 km (840 miles) off the coast of eastern Australia. Tension over socioeconomic inequalities and independence between the Melanesian Kanaks, who form over half of the population, and the influential expatriate Caldoches, resulted in a long history of political violence. Under the 1988 Matignon Accord, France imposed a year of direct rule as the prelude to a new constitutional structure which attempted to address Kanak grievances by providing greater provincial autonomy. The Nouméa accord, signed in 1998, set out a 15-year program of gradual autonomy ending in a vote on self-determination. Although some racial violence continued after 1988, it has not again reached the same level.

Nickel mining is the territory's most valuable export industry, at over 90% of export income. New Caledonia has over 20% of world reserves, and is the third largest producer in the world, but the industry employs relatively few people, and is vulnerable to fluctuations in the world price. It was seriously affected by the Asian financial crisis of 1997–1998, but recovered on the back of high world prices in 2000. Tourism and agriculture are bigger employers, although less than 1% of total land area is cultivated. Corn, yams, sweet potatoes, and coconuts have traditionally been the main crops, and since the 1990s large numbers of melons have been exported to Japan. Fishing is important, the main products being tuna and shrimps, most of which are also exported to Japan. A project for the farming of giant clams started in 1996. Unemployment nevertheless remains high among young Kanaks.