Business outline for Vanuatu

Economic Overview

Since 2003, Vanuatu accomplished to accelerate the rhythm of its growth, which placed it in a very favourable position to face the crisis. This recent growth was sustained by the expansion of its tourism, by foreign investment, by a steady income from its agricultural exports and by foreign aid. From 6.3% in 2008, its growth dropped to 3% in 2010, but it should become stronger during the next following years thanks to the tourism, agricultural and construction sectors.

In the context of the global economic slowdown, the priority of the government was to maintain the stability of its economy, applying contra-cyclic measures to counter the moderate effects of the crisis. With the revival, the government has tightened its tax and monetary policies. Structural reforms are also required in order to insure a long-term growth and to improve the business environment. As well as the improvement of basic infrastructures such as roads, ports, and transportation between the islands, which are projects taking place too.

Vanuatu is a poor country being part of the list of the least developed countries (LDC). In spite of a low unemployment rate, the population lives essentially from a food-producing agriculture and must also face the scarceness of transportation infrastructures, health care and education.

FDI in Figures

Foreign investments into Vanuatu were increasing until 2008, they receded due to the slowdown of the global economy which affected the economies of Australia and New Zealand and they still remain very fragile. The factors that encourage foreign investors are an attractive tax regime, no exchange controls and a particularly proactive FDI promotion agency. The country’s vulnerability to natural catastrophes, the weakness of its infrastructures and its geographical isolation are some of the potential hindrances to investment.
The industries that attract most of FDI are food processing and wood processing. The main investing countries are Australia, Japan, and New Zealand.

Foreign Trade Overview

Vanuatu is open to foreign trade, which represented almost 90% of the GDP during the 2007-2009 period. The country’s trade policy aims to improve the integration of the country into the economies of regional and global markets and to encourage international competitiveness.

Custom Duties are relatively high since the country’s income is mainly generated through import duties. The country does not have any major non-tariff barriers. However, limited availability of funds, lack of adequate infrastructure and long distances between the markets of the main islands create real barriers to trade.

The archipelago imports more than what it exports, which creates a deficit trade balance, a trend that has gotten worse since the economic slowdown and it should continue during the next following years.

Vanuatu’s main trading partners are Southeast Asia, Australia and India.

Source Global trade

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