Vanuatu country brief
Introduction
Vanuatu is an archipelagic nation of about 80 islands in a Y-shaped chain, extending over 1000 kilometres in a north-south direction between the equator and the tropic of Capricorn. It lies some 2000 kilometres to the northeast of Brisbane in the Coral Sea, at similar latitudes to Cairns and North Queensland.
Formerly known as the New Hebrides, Vanuatu was jointly governed by both British and French administrations before attaining independence on 30 July 1980.
Political overview
Government
The President of the Republic (Constitutional Head of State) is elected for a five-year term through secret ballot by an electoral college comprising Parliament and the Presidents of Vanuatu's six provincial governments. The current President is HE Iolu Abil, who was elected on 2 September 2009.
Vanuatu has a unicameral 52-member Parliament, elected to a four year term by universal adult suffrage.
Recent political developments
Vanuatu held national elections on 2 September 2008. On 22 September, Edward Natapei was elected Prime Minister by two votes in a secret ballot at the first sitting of the new parliament. Natapei leads a coalition government made up of his own Vanua’aku Party (VP), the People’s Progressive Party (PPP), the Green Party, the Union of Moderates Party (UMP) and several other single-member parties and independent members of parliament. Sato Kilman of the PPP is the Deputy Prime Minister.
The Natapei Government has survived a number of parliamentary motions of no-confidence since the 2008 elections and his coalition government has changed composition several times as a result.
Economic overview
After negative growth in the early 2000s, the Vanuatu economy has recently experienced strong and sustained GDP growth driven largely by tourism and construction. Vanuatu’s economy (real GDP) grew by 6.8 per cent in 2007 and 6.6 per cent in 2008. GDP per capita increased to US$4,224 in 2008 from US$3,998 in 2007. These increases are expected to moderate in 2009 due to the impact of the global recession, with GDP growth estimated to be 3.0 per cent (IMF Forecast). In its recent 2010 Budget, the Government of Vanuatu has projected GDP growth for 2010 to accelerate to 4.6 per cent.
While Vanuatu’s economic growth is starting to become more broad-based, it remains centred on tourism. Services dominate the economy, contributing 72 per cent of GDP. The economy also relies heavily on agriculture (18 per cent of GDP). The vast majority of the population, over 70 per cent of whom reside in rural areas, is engaged in subsistence agriculture although most ni-Vanuatu are also involved in the cash economy, typically trading copra for money to pay for domestic expenses.
The tourism sector is recognised by the Government of Vanuatu as a key sector for development, directly employing an estimated 1,200 people. Increased tourism has had direct and indirect contributions to the service sector, with the flow on to local labour and producers of goods and services used in transport, communication, wholesale and retail trade, banking and insurance and hotel and accommodation services. Continuing growth in Vanuatu’s tourism sector will be crucial to providing employment opportunities for Vanuatu's young and rapidly growing population (60 per cent of which is under 25 years). The arrival of Pacific Blue into the aviation market in September 2004 stimulated competition. Fares fell and increased air tourist arrivals by 21 per cent in its first year of operation. Increasing investment in new boutique-style hotels, refurbishment of larger resorts, stronger interest in locally-owned bungalows and industry interest in the backpacker market also point to further growth in this industry.
Real estate development has seen a boom since mid-2004, although development has largely been focused on the island of Efate, particularly the capital Port Vila. Land speculation (a major element of the boom) has become a political issue, illustrated by the Government’s decision (under pressure from traditional land-owners) to place a moratorium on all new development proposals in September 2006.
Fiscal reform has led to better management systems
Vanuatu's economic reform in recent years has led to a major improvement in the management of its public sector finances, with expenditure now more carefully controlled through an accountable and transparent process. Vanuatu adopted a new fiscal format, part of which was the introduction of a Value Added Tax, on 1 August 1998, as well as reform of the tariff structure. A new program-budgeting format was introduced in 1998 and Vanuatu now has an integrated recurrent development budget, incorporating all expenditures funded from domestic and external sources.
A limited revenue base continues to constrain government efforts to deliver services and implement reforms, although the current government is making efforts to increase revenue through tax reform and improvements in tax collection and compliance. In recent years the Government has produced budget surpluses and implemented reforms to stimulate economic growth.
The Millennium Challenge Account
Vanuatu is the only Pacific island country eligible for funding under the US Government funded Millennium Challenge Account (a US$1 billion account encouraging good governance). On 2 March 2006, Vanuatu and the Millennium Challenge Corporation signed a Compact grant agreement (similar to a contract) for a new transport infrastructure program. This five-year compact program, worth US$65.69 million, aims to benefit rural agricultural producers and providers of tourist-related goods and services by reducing transportation fees. The program focuses on roads on the islands of Santo and Efate.
Bilateral relationship
Australia has an important relationship with Vanuatu. Australia is the largest aid donor and the main source of tourists and investment. There is also a significant resident population of Australians. Australia and Vanuatu enjoy a very broad range of links at government, business and community levels.
Recent visits
Vanuatu Prime Minister Edward Natapei and Mrs Natapei and Foreign Minister Natuman visited Australia for the Pacific Islands Forum in Cairns 5-7 August 2009. Immediately prior to the Forum, Prime Minister Natapei attended the Lowy Institute conference, The Pacific Islands and the World, held in Brisbane on 2-3 August.
Prime Minister Natapei also visited Australia as a Guest of Government for the signing of the Australia-Vanuatu Partnership for Development with Australian Prime Minister, Kevin Rudd, in Canberra on 27 May 2009.
An Australian Parliamentary delegation, led by Mr Kelvin Thomson MP, visited Vanuatu from 26 July to 1 August 2009. The visit coincided with Vanuatu’s 29th anniversary independence celebrations and the delegation met with then President Mataskelekele and Prime Minister Natapei.
In October 2009 a Vanuatu Parliamentary delegation made a reciprocal visit to Canberra, led by the then Speaker Maxime Carlot Korman. The delegation met with then Parliamentary Secretary for Pacific Island Affairs, Duncan Kerr.
Australian Trade Minister Simon Crean and the Parliamentary Secretary for International Development Assistance, Bob McMullan, visited Vanuatu in April 2009 to consult their counterparts on trade and development issues, including the prospective PACER Plus Agreement.
Development assistance
Total Official Development Assistance from Australia to Vanuatu continues to increase and is estimated to reach $56.3 million in 2009-10, which includes $41.6 million towards a bilateral country program.
Australia's development assistance in Vanuatu is guided by the recently signed Australia-Vanuatu Partnership for Development, and the Australia-Vanuatu Joint Development Cooperation Strategy 2005- 2010, which support the Vanuatu Government’s Priorities and Action Agenda (PAA) 2006-2015. Under the Partnership, Australia will provide Vanuatu with additional assistance to mitigate the impact of the global recession and accelerate progress towards the UN Millennium Development Goals. Reflecting the commitment of both governments to the principles of mutual respect and mutual responsibility, initial priority areas are education, infrastructure, economic governance and health.
A key feature of Australia’s development assistance to Vanuatu is the Governance for Growth (GFG) program. Through GFG, Vanuatu and Australia are working jointly to identify and overcome governance obstacles to broad-based growth, effective service delivery and poverty reduction. The program draws on a wide range of aid modalities including technical assistance, grants, direct investment as incentives, and brokering the involvement of international organisations and other donors.
AusAID, through the GFG program, provided support to end the telecommunications monopoly in Vanuatu in 2007-08, which has massively expanded access to telecommunications in rural areas. The introduction of competition has led to greater coverage (the proportion of Vanuatu’s population with access to mobile telephony increased from 20 per cent to 75 per cent during 2008) and a decrease in costs.
Beginning in 2009, the Vanuatu Transport Sector Support Program is designed to tackle infrastructure constraints and enhance economic growth. Major industries such as tourism are expected to benefit from improved roads, more reliable shipping services and more efficient wharves.
In the health sector, maternal mortality at Vila Central Hospital has continued to fall, and pharmaceutical supply has been strengthened. The Pacific Malaria Program has made strong early progress in contributing to reduced malaria incidence, with a 38 per cent decline in malaria parasite incidence in 2008.
Defence cooperation
Australia has an active Defence Cooperation Program with Vanuatu. Australia assists Vanuatu to maintain and operate its Pacific Patrol Boat, which Australia donated in 1987, with two Royal Australian Navy advisers. Australia also provides targeted assistance to the Mobile Force element of the Vanuatu Police Force (VPF). The Defence Cooperation Program for 2008-09 comprised A$1.36 million, with just over A$310,000 spent on the Pacific Patrol Boat Program.
Bilateral economic and trade relationship
Australian exports to Vanuatu in 2008 totalled A$84 million. Australian imports from Vanuatu in the same period totalled A$2 million. Vanuatu remains a modest market for Australia with some growth potential, dependent largely on economic growth and development in Vanuatu.
Australia is the major source of foreign investment in the Vanuatu economy with a focus on agriculture, tourism, finance and construction. Two thirds of long stay tourists to Vanuatu (some 50,000 people) and almost all cruise ship passengers are Australian.
In August 2008 Vanuatu was selected (along with Tonga, Kiribati and Papua New Guinea) to participate in the Australian Government’s Pacific Seasonal Workers Pilot Scheme (PSWPS). The first small group of ni-Vanuatu workers were in Australia from April to October 2009.
Foreign relations
Vanuatu joined the Commonwealth and the Pacific Islands Forum at the time of its independence in 1980. Vanuatu is also a member of La Francophonie Community, the United Nations and several specialised agencies, and of the Non-Aligned Movement. Vanuatu is a member of the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB) and the African Caribbean Pacific (ACP) grouping enjoying special relations with the European Union. Vanuatu recently resumed its accession process to join the World Trade Organization (WTO) after withdrawing its bid several years ago.
Resident diplomatic missions in Port Vila are maintained by Australia, France, New Zealand, the People's Republic of China and the European Commission. Vanuatu currently has four diplomatic offices overseas: the United Nations in New York, in Beijing, in Brussels and in Noumea, as well as a number of honorary consulates, including one in Sydney.
Members of the Vanuatu Police Force, including the Mobile Force, have served in UN Peacekeeping missions in East Timor, Haiti, Sudan and Bosnia, in the Peace Monitoring Group and Transition Team in Bougainville, and in the Regional Assistance Mission to Solomon Islands.
Melanesian Spearhead Group (MSG)
Vanuatu has been a strong supporter of the Melanesian Spearhead Group (MSG) as a reference point for Vanuatu's regional policies and the MSG Trade Agreement provides for free trade in goods produced by Melanesian countries. Vanuatu and other MSG member states (Fiji, Papua New Guinea, and Solomon Islands) signed an MSG Constitution in Vanuatu on 23 March 2007.
A new MSG Secretariat building was opened in Port Vila on 30 May 2008. Vanuatu is the current Chair of the MSG (taking over from PNG) following approval by MSG Foreign Ministers at their meeting in Port Vila in May 2008.
Visitor information
Australians visiting Vanuatu do not need to apply for a visa prior to travel to Vanuatu as tourist visas are given on arrival in Port Vila. Australian passport holders are permitted to stay in Vanuatu for up to four months provided they can produce evidence of an onward air or sea ticket. Vanuatu's currency is the Vatu. Australian currency is accepted in some establishments in Port Vila and is easily exchanged at banks, money changers and the larger hotels.
Websites
Australians wishing to visit Vanuatu should consult our travel advice at Smartraveller and the Australian High Commission in Port Vila website.
Last updated February 2010