Vanuatu Country Brief
Introduction
Vanuatu gained its independence on 30 July 1980. Formerly known as the New Hebrides, it was jointly governed by both British and French administrations. After a struggle for independence, Father Walter Lini became the nation's first Prime Minister. The second decade of independence was plagued by political instability with a number of different coalitions governing Vanuatu.
Political Overview
Government
The President of the Republic (the 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, HE Kalkot Mataskelekele, was elected on 16 August 2004 and is a former lawyer and Supreme Court judge as well as one of the principal authors of Vanuatu's constitution.
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. All 52 seats in the 17 single and multi-member constituencies were contested. 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 National United Party (NUP) and several other single-member parties and independent members of parliament. Former Prime Minister Ham Lini of the NUP became Deputy Prime Minister and Bekoa Kaltongga (a new MP) of the VP became Minister for Foreign Affairs. The government has since survived a number of parliamentary motions of no-confidence.
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 grew by 6.5 per cent in 2007 with 6.3 per cent growth estimated for 2008. GDP per capita increased to US$2,385 in 2008.
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 buy modern commodities and pay school fees.
The tourism sector is recognised by the Government 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.
Commitment to Reform and Rural Economic Development
In response to the economic and political challenges facing the country, successive Vanuatu Governments have pursued a wide-ranging reform program since 1997 with assistance from the Asian Development Bank (ADB) and international aid donors, including Australia. This has been guided by the Comprehensive Reform Program (CRP) which has helped stabilise Vanuatu's development prospects since 1997. In a move to prioritise activities under the CRP, the Vanuatu Government developed the Prioritised Action Agenda (PAA) in 2003. The PAA is a development framework of priorities to promote reform. The five year Australian-Vanuatu Joint Development Strategy signed on 31 March 2005 is based on the PAA.
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 in line with the CRP, 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. In recent years the Government has produced budget surpluses and has 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 (an 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 infrastructure upgrades in eight islands in Vanuatu. 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.
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
Australian Trade Minister, the Hon Simon Crean MP, and the Parliamentary Secretary for International Assistance, the Hon Bob McMullan MP, visited Vanuatu in April 2009 to consult with their counterparts on trade and development issues. This included discussions about the prospective PACER Plus Pacific Free Trade Agreement.
Development Assistance
Total Official Development Assistance from Australia to Vanuatu continues to increase and is estimated to reach $56.3 million in 2008-09, which includes $41.6 million towards a bilateral country program. Australia's development assistance in Vanuatu is guided by the Australia-Vanuatu Joint Development Cooperation Strategy 2005- 2010 and supports the Vanuatu Government's Priorities Action Agenda (PAA) 2006- 2015. Australian assistance works with Vanuatu to improve governance and reduce poverty, translating Vanuatu's economic growth into new jobs and better services. The aid program directly supports activities to strengthen the governance of key institutions, achieve a stronger and more accountable law and justice sector and ensure effective delivery of government services such as health and education.
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, 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. The Vanuatu Government awarded a mobile telephone license to Digicel, which launched its operations throughout the country on 25 June 2008. Telecommunications reform has also included the establishment of a Universal Access Fund which will be financed mainly from revenue to support further investment in telecommunications where services are not commercially viable (for example, on some of country's most remote islands).
Australia is developing a long-term program of support to the Vanuatu Government to strengthen infrastructure maintenance, enhance local private sector capacity and promote employment opportunities. The Vanuatu Transport Sector Support Program (VTSSP) is intended to be a long term program supported by the Australian Government.
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 an adviser to assist the Mobile Force element of the Vanuatu Police Force (VPF) develop operational, leadership and field skills. The Defence Cooperation Program for 2008-09 is budgeted at $1.36 million, with just over $310,000 for the Pacific Patrol Boat Program.
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 the Francophone 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 after withdrawing its bid to join the World Trade Organization (WTO).
Vanuatu has diplomatic relations with 74 countries. Resident 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 Vanuatu's Mobile Force and Police 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.
Bilateral Economic and Trade Relationship
Australian exports to Vanuatu in 2007-08 totalled $79 million (principally liquefied propane and butane, and copper). Australian imports from Vanuatu in the same period totalled $2 million (principally essential oils and perfumes). Vanuatu remains a modest market for Australia with some growth potential, dependent largely on economic growth and development in Vanuatu. Australia is also the major source of foreign investment in the economy with a focus on agriculture, tourism, finance and construction. Two thirds of long stay tourists to Vanuatu are Australian.
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 www.smartraveller.gov.au.
Updated 22 May 2009