Vanuatu

Politics:

• Analysis

  Vanuatu politics: Quick View - The government survives its first no-confide

  Event

  Vanuatu's government survived a no-confidence motion on December 10th, winning the backing of 27 members of the 52-seat legislature.

  Analysis

  Less than one month into its term of office, the new administration, headed by the prime minister, Sato Kilman, was able to see off its first no-confidence motion. However, the number of legislators who turned out to back Mr Kilman was lower than the 29 who voted to establish the government in November. Opponents have continued to question whether the prime minister was eligible to stand in the general election held at the end of October, claiming that he owed the state money and was thus technically not allowed to run. Mr Kilman has denied the accusations, and it seems unlikely that his premiership will be derailed by a legal challenge on the issue.

  The narrowness of the government's support base was further highlighted by the death in December of the minister for infrastructure and public utilities, Harry Iauko. Mr Iauko's death will open up room for another member of parliament to be appointed to the cabinet, potentially bringing new people into the ruling coalition and thereby strengthening it. Nevertheless, the volatility of the local political environment means that the outcome of a by-election to replace him could significantly alter the balance of power in the legislature.

  December 11, 2012

• Background

  Vanuatu: Key figures

  Ham Lini

  Prime minister since December 2004, and leader of the National United Party.

  Edward Natapei

  Prime minister from 2001-04, and leader of the Vanua'aku Party.

  August 27, 2008

• Structure

  Vanuatu: Political structure

  Official name

  Republic of Vanuatu

  Form of state

  Parliamentary, based on the UK model

  The executive

  Council of Ministers, made up of 12 members of parliament (MPs) chosen by the prime minister, who is in turn elected by the legislature from among its members

  Head of state

  Iolu Abil was elected president in September 2009. The president is elected for a five-year term by an electoral college drawn from MPs and heads of local government

  National legislature

  Unicameral parliament of 52 members, elected for four-year terms on a universal franchise and using a system containing an element of proportional representation. The National Council of Chiefs, elected from the district councils of chiefs, exists alongside parliament to discuss and be consulted on matters relating to custom and tradition

  Legal system

  A system of magistrates' courts, leading up to the Supreme Court

  National elections

  The last parliamentary election was held in September 2008; the next is due on October 30th 2012. The next presidential poll is due by 2014

  National government

  There was no clear winner in the 2008 parliamentary election. The country has undergone five changes of leadership since December 2010. Sato Kilman was elected by MPs as prime minister in June 2011, receiving 29 of the 52 votes

  Main political organisations

  The Vanua'aku Party (VP), the National United Party (NUP), the Union of Moderate Parties (UMP), the Confederation of Greens (CG), the People's Progressive Party (PPP), the Melanesian Progressive Party (MPP), the Vanuatu Republican Party (VRP), the Labour Party, the John Frum group, the Land and Justice Party (LJP) and the National Community Association (NCA)

  Prime minister: Sato Kilman

  Deputy prime minister, minister for trade, commerce & industry: Ham Lini

  Key members of the Council of Ministers

  Agriculture: James Nwango

  Education: Marcellino Pipite

  Finance: Moana Carcuses Kalosil

  Foreign affairs: Alfred Carlot

  Health: Willie Ruben Abel

  Infrastructure & public utilities: Harry Iauko

  Internal affairs: George Wells

  Justice: Charlot Salwai Tabimasmas

  Lands & natural resources: Steven Kalsakau

  Ni-Vanuatu (indigenous people) business: Stephen Don Ken

  Central bank governor

  Odo Tevi

  October 19, 2012

Economy:

• Background

  Vanuatu: Economic background

  Gross domestic product by sector
  (Vt m; constant 1983 prices)
  	2001	2002	2003	2004	2005
  Agriculture	n/a	2,894	3,083	3,305	3,259
  Manufacturing	n/a	569	595	625	674
  Electricity, gas & water	n/a	414	410	424	442
  Construction	n/a	506	537	576	646
  Trade	n/a	4,849	4,854	4,773	5,331
  Transport & communications	n/a	1,459	1,512	1,747	1,880
  Finance	n/a	1,162	1,266	1,346	1,597
  Public administration & others	n/a	2,131	2,207	2,223	2,268
  GDP incl others	n/a	15,444	15,936	16,812	17,953
  Source: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries.

  Download text file (csv format)

  August 27, 2008

• Structure

  Vanuatu: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at market prices (Vt bn)	60.1	63.0	66.8	71.3	83.8
  GDP (US$ bn)	0.6	0.6	0.7	0.8	0.9
  Real GDP growth (%)	6.2	3.5	3.1	4.3	4.2
  Consumer price inflation (av; %)	4.9	4.2	2.8	0.9	1.4
  Population (m)	0.2	0.2	0.2	0.2	0.3
  Exports of goods fob (US$ m)	41.9	55.2	51.3	67.4	62.7
  Imports of goods fob (US$ m)	-317.8	-187.2	-290.8	-310.2	-288.5
  Current-account balance (US$ m)	-176.0	-12.0	-105.2	-126.9	-88.8
  Foreign-exchange reserves excl gold (US$ m)	115.2	148.6	161.4	173.8	195.6
  Total external debt (US$ bn)	125.8	129.8	n/a	n/a	n/a
  Debt-service ratio, paid (%)	7.0	34.1	n/a	n/a	n/a
  Exchange rate (av) Vt:US$	101.33	106.74	96.91	89.47	93.00
  a Actual. b Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Origins of gross domestic product 2009	% of total	Components of gross domestic product 2008	% of total
  Agriculture	21.8	Private consumption	58.4
  Industry	10.9	Government consumption	14.9
  Manufacturing	3.0	Fixed investment	32.6
  Services	77.9	Stockbuilding	0.0
  Statistical discrepancy	-10.6	Exports of goods & services	47.8
  		Imports of goods & services	56.1
  Principal exports 2010	Vt m	Principal imports 2010	Vt m
  Coconut oil	934	Machinery & transport equipment	7,252
  Copra	579	Food & live animals	5,108
  Kava	508	Basic manufactures	3,818
  Beef	494	Mineral fuels	3,618
  Cocoa	384	Miscellaneous manufactured goods	2,736
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  Thailand	57.3	China	26.7
  Japan	21.8	Singapore	21.2
  South Korea	2.3	Australia	13.6
  Malaysia	2.1	New Zealand	7.2
  Netherlands	1.9	Fiji	6.7

  Download the numbers in Excel

  Download text file (csv format)

  October 19, 2012

• Outlook

  Vanuatu: Country outlook

  Vanuatu: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Vanuatu's politics will remain fractious. Following the next parliamentary election, which is due on October 30th, the new government will-like its predecessor-be challenged by no-confidence motions. It is all but certain that no single party will command a majority in the legislature following the poll. The next prime minister is likely to be chosen by the parties that form the next coalition government. The election is not expected to prompt civil unrest, and should pass peacefully, but tensions between the police and the political authorities could emerge as a source of instability in the 2013-14 forecast period. Exports are expected to grow strongly, boosted by Vanuatu's new membership of the World Trade Organisation (WTO), but net exports will detract from overall economic expansion, owing to rapid import growth. Private consumption will remain the main driver of real GDP growth in the next two years. The economy will expand at an average annual rate of 4.7% in the period. Inflows of workers' remittances should expand in 2013-14, supported by the development of seasonal worker schemes in New Zealand and Australia that allow Vanuatuans temporary access to work in those countries.

  DOMESTIC POLITICS: Vanuatu's political scene will remain fractious in 2013-14. The election due to take place at the end of October is set again to return a large number of small parties that will vie among themselves for control of the government. No-confidence motions are used frequently in the country, often bringing down the prime minister-between January and June 2011 there were four changes of leadership. The government of Sato Kilman (of the People's Progressive Party) returned a degree of stability to the country's political scene during his period in office, from June 2011 until October 2012. However, the semblance of stability provided during Mr Kilman's tenure is likely to prove temporary, with politics returning to its usual turbulent course in 2013-14. Tensions between senior members of Mr Kilman's government and the police were evident in 2012. The Economist Intelligence Unit does not expect these to escalate into police action against the next government, even if Mr Kilman is re-elected. However, given the volatile nature of local politics and the fragile state of Vanuatuan institutions, tensions between the security forces and politicians are troubling. Corruption will remain a concern, owing to close ties between politicians and local businessmen, in addition to the limited independence of the police and judiciary. There has been some controversy over the government's dismissal of the lead official of the Election Commission, Lawson Samuel, shortly before the vote. This has raised questions about whether ministers are improperly trying to influence the poll's outcome. Several issues have the potential to cause social unrest. Land sales by the government are a common source of tension, especially when such lands are held under traditional community ownership. The country's recent accession to the WTO may also provide a source of controversy as vested interests are challenged by the more open trade environment. In a sign of differences over the accession, the president, Iolu Abil, delayed signing the measure into law for several months, until coming under pressure from the courts to do so. Public opposition to WTO entry has been led by local religious groups and non-governmental organisations.

  INTERNATIONAL RELATIONS: Relations with Australia and New Zealand will remain tense. The New Zealand government has said that it will reconsider the support that it gives to Vanuatu following the release in March 2010 of a coroner's report on the death of a convicted rapist, John Bule. Vanuatu's chief justice, a New Zealander, Nevin Dawson, has faced death threats after recommending that the paramilitary police force, the Vanuatu Mobile Force, be investigated for allegedly beating Bule to death. Meanwhile, relations with Australia were strained after the Australian police arrested Mr Kilman's private secretary in April 2012 as the prime minister's delegation was transiting through that country on a diplomatic trip. The arrest, which was thought to be part of the Australian government's efforts to crack down on tax evasion via Vanuatu, prompted Vanuatuan authorities to expel several representatives of the Australian Federal Police who were stationed in the country.

  POLICY TRENDS: The next government will continue with reforms aimed at improving Vanuatu's business environment, but progress will be slow, mainly owing to the country's chronic political instability. After almost a decade of negotiations with the organisation, Vanuatu officially joined the WTO in August this year. Vanuatu is expected to apply fully all WTO provisions, except those relating to intellectual property and the publication of trade information, which are to be phased in. The country will apply an average final bound tariff rate of 39.7% (43.6% for agricultural products and 39.1% for industrial products). Accession to the WTO will provide further impetus to the introduction of pro-business reforms. In the early 2000s the country was taken off an OECD blacklist of countries suspected of being centres of money-laundering, after the authorities took steps to bring regulations into line with global standards. However, the national financial regulator, the Vanuatu Financial Services Commission, will need to reassure international regulators periodically that it is continuing to fulfil its obligations in this area. The government will remain dependent on foreign grants and loans to balance its budget. Based on data from the Asian Development Bank, a budget deficit equivalent to 2.3% of GDP was recorded in 2011, but without grants the deficit would have stood at Vt2.4bn (around US$27m) rather than the actual figure of Vt1.6bn. The 2012 budget, which was approved by parliament in December 2011, targets a deficit of about Vt2bn, although we expect the fiscal deficit is to reach Vt2.5bn. The government is required by the 1998 Public Finance and Economic Management Act to target budget surpluses, but it is expected to post modest deficits in 2013-14, averaging the equivalent of 1.8% of GDP. Nevertheless, government debt will remain low as a proportion of GDP in the next two years.

  ECONOMIC GROWTH: In recent years the performance of the domestic economy has been volatile. Real GDP grew by 3.3% a year on average in 2009-10, after having expanded strongly, at an average annual rate of 6%, in the previous five years. Economic growth is estimated to have recovered to an annual average of 4.3% in 2011-12 and is forecast to remain strong in 2013-14, averaging 4.7% a year. This will be driven to a large extent by construction of infrastructure and other facilities. Tourism and agricultural exports will also contribute to growth, partly thanks to more frequent flights to and from both Australia and Fiji. Economic conditions in Australia and New Zealand, two important sources of tourists for the local economy, should remain relatively positive in 2013-14, helping to offset weakness in demand from other developed economies. Meanwhile, WTO membership should also spur merchandise trade growth, providing a boost to exports and trade-related services sectors.

  EXTERNAL ACCOUNT: The deficit on the current account will remain large throughout 2013-14, and attracting sufficient foreign funding to finance the shortfall will continue to be a challenge. According to the IMF, in 2011 the current-account deficit expanded to US$126.9m, from US$105.2m in 2010. This was largely driven by an expansion in the merchandise trade deficit, as the increase in imports outpaced that in exports. The transfers surplus also weakened as remittances from Vanuatuans working overseas were negatively affected by the deteriorating global economic climate. Although the balance-of-payments weakness is thought to have continued in 2012, remittance inflows should pick up in 2013-14, supported by temporary work schemes for Vanuatuans in New Zealand and Australia as well as increasing remittances from the US as that country's economy improves. In addition, foreign grants are expected to support the balance of payments in 2013-14.

  October 23, 2012

View detailed map

Country Briefing

Land area

12,190 sq km

Population

234,023 (2009 census)

Major islands

Efate, Espiritu Santo, Malakula, Tanna, Erremango

Capital

Port Vila (population 44,039, according to 2009 census)

Climate

Tropical

Weather in Port Vila

Cool weather in winter and cyclones in summer (December-April). Average annual rainfall is around 2,300 mm; average humidity is 83%. Average temperatures are in the range of 22-27°C

Languages

Bislama (Pidgin), English and French (all official); about 110 local languages

Measures

Metric

Currency

Vatu (Vt). Average exchange rate in 2011: Vt89.5:US$1

Fiscal year

Calendar year

Time

11 hours ahead of GMT

Public holidays

January 1st; February 21st (Father Lini Day); March 5th (Custom Chief's Day); April 6th (Good Friday); April 9th (Easter Monday); May 1st (Labour Day); July 24th (Children's Day); July 30th (Independence Day); August 15th (Feast of the Assumption); November 29th (Unity Day); December 25th (Christmas Day); December 26th (Family Day)

July 24, 2012