Vanuatu Report 2010

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VANUATU Treasure islands reward investors Vanuatu is the small country enjoying huge success through its strong ties with China. investment in agricultural development and human resources training n attractive archipelago in the heart of the Pacific Ocean, Vanuatu has played an active role in the island nation’s modernization. Officials is riding on the crest of a wave as it reinforces its reputation as see this successful trend continuing, with trade between China and a safe haven for foreign direct investment (FDI) and entices the Pacific region expected to reach U.S.$3 billion by the end of 2010. increasing numbers of Chinese investors to its shores.

Such substantial investment will allow more improvements to key A string of more than 80 mountainous islands covered in tropical infrastructure projects, as well as health and welfare programs. rainforests and fertile soil, the Republic, which gained indepedence Investment opportunities in Vanuatu exist across all industrial and from Britain and France in 1980, is benefiting from private sector reforms that are generating record revenues and boosting living standards for its 230,000 citizens.

“We are working really hard to ensure the ongoing Economic growth jumped 6.6% in 2008, continuing peace, harmony, and stability that investors seek the positive trend of previous years, with levels of in order to invest confidently in Vanuatu.” private sector credit, household consumption, and VAT collections also climbing. Heavily reliant on tourism, Edward Natapei, Prime Minister growth was expected to be a steady 4% in 2009 due to the global financial downturn, although tourism arrivals commercial sectors and, thanks to a range of government incentives continued to go up. Other key sources of revenue and employment and the abolition of income tax, corporate tax, and capital gains tax, include fisheries, agriculture, and financial services. the country’s financial services sector is flourishing.

Currently classed as a Least Developed Country by the United “Although we are a small state and have had our difficulties, we Nations, Vanuatu is poised to shake off that are working really hard to ensure the ongoing peace, harmony, status as its socioeconomic development and stability that investors seek in order to invest confidently in gathers pace. While such a move may Vanuatu,” says Prime Minister Edward Natapei, who has headed result in a reduction in foreign aid, the coalition government since September 2008. “We are focusing officials believe the impact would be on the development of the country and attracting FDI in areas such easily offset by Vanuatu’s likely accession as infrastructure, health, and education. China has already assisted to the World Trade Organization, us with many developments and projects: it built our Parliament which will open up a flood of building and our main university, for example. lucrative opportunities.

“The telecommunications sector has been opened up to Having first established competition and we are also setting up an e-government diplomatic ties in 1982, China and Vanuatu network with the help of the Chinese that will allow us to signed an economic cooperation agreement in operate more efficiently.”

2006 that removed import tariffs on products made on the islands. The relationship has since A Business-Friendly Climate for Investors flourished, with China now one of the country’s Thanks to the government’s forward-thinking policies, a firm leading trade partners, along with nearby Australia commitment to greater transparency, and such a successful and New Zealand. relationship with China, Vanuatu’s future looks bright. The Statistics from China’s Ministry of Commerce show Asian giant has has done much to help people from the it has invested hundreds of millions of dollars in the Pacific region over the past few decades with Vanuatu in Pacific region over the last few years, mainly in resources particular being a major beneficiary of its spending on development, aviation, fisheries and construction services. In investment, along with its superior business know-how addition, Chinese-manufactured planes and ships have been and experience. successful imports for Vanuatu and its neighbors, while Chinese

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VANUATU

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Air Vanuatu flies people from the region and beyond

Important new infrastructural projects are under way across the country

Charged with promoting a sound financial structure and regulating the issue, supply, availability, and international exchange of money across the country, the Reserve Bank of Vanuatu is the most powerful player in the country’s financial services sector. Led by governor Odo Tevi, the Reserve Bank of Vanuatu advises the government on

capital, Port Vila, and Luganville, its second-largest city. “We have enjoyed a solid boom period over the past few years, with stable FDI flowing into the country,” says National Bank governor Bob Hughes.

“China is a growing economy and we would like to keep our relationship strong because of its huge potential.”

Odo Tevi, Governor Central Bank

banking issues and monetary matters as it protects and expands the nation’s economic development. “Our main objectives are to have a low and stable rate of inflation and a stable exchange rate,” states Tevi. “We ensure there is enough liquidity for investors to borrow from local banks. While other countries in the region face balance of payment problems, we have no such worries.”

Tevi believes Vanuatu’s strategic location close to the major markets of Australia and New Zealand gives it an excellent competitive advantage over other destinations. “We have a high influx of tourists from Australia,” he says. “In the long term, it is an advantage being near emerging economies in Asia. China is a growing economy and we would like to keep the relationship strong because of its huge potential. Vanuatu’s economic stability will keep attracting investment from this market and act as an incentive for investors.”

One such beneficiary is the National Bank of Vanuatu. Formed in 1991, the National Bank returns its profits to the people via government dividends. With 21 branches, the bank is the only one to provide services outside the main population centers of the country’s

Financial Services Sector Embraces Transparency Established 16 years ago and operating under the control of the Ministry of Finance, the Vanuatu Financial Services Commission (VFSC) is responsible for the regulation and supervision of the financial services industry. The Commission holds talks with some of the world’s most important financial bodies, including the International Monetary Fund, the Asian Development Bank, and the World Bank.

“Vanuatu will become more transparent in its dealings within the financial services sector as our improved legislative framework will install a new registry and an online presence that allows everyone to access our documents,” says VFSC commissioner George Andrews.

“I see China as our main market in the future, and from next year we will be in China promoting Vanuatu and the wealth of investment opportunities that exist here for Chinese businesses.

“We are looking to establish offices in major cities across China as our new legislative framework will see our financial services sector regarded as clean and transparent.”

Tasked with facilitating and promoting FDI in all areas of the economy, the Vanuatu Investment Promotion Authority (VIPA) is at the forefront of government efforts to secure foreign funding and investments.

VIPA has awarded an average of 200 investment approval certificates a year over the past five years as its efforts to attract foreign enterprises reap lucrative rewards. “We are encouraging more Chinese investors to come here, and look forward to greater interest in the hotel and

Contacts and useful links Government of Vanuatu www.vanuatugovernment.gov.vu Reserve Bank of Vanuatu www.rbv.gov.vu Vanuatu Financial Services Commission www.vfsc.vu National Bank of Vanuatu www.nbv.com.vu Vanuatu Investment Promotion Authority www.investinvanuatu.com Ministry of Trade, Commerce and Tourism Investment +678 25 674 Vanuatu Tourism Office www.vanuatutourism.com www.businessfocus.org.uk

Vanuatu National Tourism Development Office +678 26 020 Air Vanuatu www.airvanuatu.com Embassy of the People’s Republic of China PMB 071, Rue d’Auvergue St, Port Vila +678 22 353 Further Information on Vanuatu is available from: Vanuatu’s daily newspaper www.dailypost.vu Online news service www.vanuatunews.com

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VANUATU

Gorgeous beachfront villas boast stunning views of Vanuatu’s natural beauty

Tourists can enjoy a range of sports and activity holidays on Vanuatu’s islands

resort business so that we can cater for the growing numbers of Asian tourists,” states Joe Ligo, CEO of VIPA. “We offer incentives in all sectors and are working hard to streamline our approval process. We would also like to encourage more Chinese investment in the tourism and agricultural sectors.”

That view is echoed by Vanuatu’s Minister of Finance and Economic Development, Sela Molisa: “Our economy is in good shape as inflation is low and, we continue to receive increasing numbers of tourists. We have an excellent relationship with China and it is important that this relationship continues to develop in areas such as trade, commerce, and politics.”

tourists, and would of course like to attract more. However, substantial investment is needed to build more hotels. As the former Trade and Commerce Minister James Bule remarked this summer, “We hope the Chinese will first come here as tourists and leave with such a good impression that they will come again—but next time as investors.”

Established 23 years ago, Air Vanuatu has played a major role in Vanuatu’s rise as a popular destination for travelers from across the region. Based in Port Vila, the company operates routes to major cities across Australia and New Zealand, and to Vanuatu’s smaller islands. Its modern fleet includes a Boeing 737-800 with colors that capture the essence of Vanuatu’s array of natural assets—sea, sand, mountains, and volcano.

Prime Minister Natapei sees a range of investment opportunities in the tourism sector for Chinese companies. “Tourism plays a

Building Up A Country Vanuatu’s infrastructure is also undergoing steady transformation, with foreign partners involved in a number of projects across all key sectors and various locations. One such “We are extremely focused on improving efficiency example is the build-operate-transfer agreement that levels in the transport sector in order to pave the way has been launched to extend the country’s Bauerfield for future growth.”

International Airport near capital of Port Vila.

Meanwhile, a Japanese-funded wharf to improve Sela Molisa, Minister of Finance and Economic Development passenger and cargo handling services opened at the port in May. The upgrade will play a major part in the very important role in our economy and we want to develop a new country’s development, as imports make up 70% of the economy. international airport and sea port facilities in order to meet the Major road resurfacing is also being carried out around the islands, growing number of visitors,” he says. particularly the ring-road around Efate, the main tourism belt.

“There are Chinese investors keen to build the airport, which they will be allowed to operate for some years before it is returned to Natural Wonders Are A Magnet For Tourists government control. As well as tourism, we would like to see more Boasting some of the most beautiful landscapes and beaches in the Chinese participation and investment in the agricultural sector as it Pacific, Vanuatu’s tourism industry is a key source of foreign exchange would help us develop the rural areas and communities.” earnings and a leading area of employment.

Industry data shows demand for air travel soared more than 15% in

by Business Focus www.businessfocus.org.uk 2008 from 2007, while passenger numbers for the first quarter of 2009 were up by nearly a third over the same period of the previous year.

Business Focus wishes to thank the following institutions This rapid growth is attributed to the country’s growing popularity as for their support: a short-haul destination for tourists from Australia and New Zealand, Ministry of Trade, The Prime Minister’s Office; while several leading airlines have increased the number of flights, Commerce & Ministry of Finance; resulting in lower airfares through tougher competition.

Tourism Investment; Vanuatu National Tourism The number of Chinese tourists visiting Vanuatu has also increased, Vanuatu Financial Development Office; thanks to better air links and increased cruise liner visits to its ports.

Services Commission; Vanuatu Tourism Office; The government has worked very hard to promote Vanuatu’s natural National Bank of Vanuatu.

Reserve Bank of Vanuatu; beauty, welcoming population, and unique culture to the Chinese www.businessfocus.org.uk