Between tax incentives, friendly and hardworking people, and tropical climate, the Pacific Islands are a great place for investors around the world. In your opinion, what are the biggest assets and untapped potential that Vanuatu has to offer international investors over the rest of the Pacific Islands?
When compared to Fidji or Caledonia, Vanuatu Geographic location is one of its competitive advantages. Moving ahead with our Capital Infrastructure Program, which means to have in the future proper infrastructure in place, can set the pace for our future growth. If developed to its full capacity, Vanuatu can even become the focal point within the region. In addition, current financial policies are focused exactly in facilitating an investment environment.
The office of the VPMU was established and mandated by the Vanuatu Council of Ministers (COM) in early 2012 for two main function: Administrate and Manage major Vanuatu Government Infrastructure and Coordinate and Facilitate projects fund between funding partners, the Government of Vanuatu and various stakeholders. What are VPMU’s most notable achievements since its establishment in 2012?
Before VPMU was established in 2012, the adopted modality was an agreement between Vanuatu Government and USA Government, where a similar office was established under the name Millennium Challenge Account Vanuatu (MCA). Upon the successful completion of the Millennium Challenge Account Program, and realizing such establishment to be a main focal agency for the government, it was then decided to establish a specific permanent entity, which integrated the former MCA structure and provides off-site major government’ property administration. This model also implied that the entity was no longer under the responsibility of the Finance Minister but becoming a part of the Prime Minister’s direct portfolio. Providing off-site management of major infrastructure projects implies that the head of the executive is well informed in due time of its progress, and therefore supporting policies can be consistently implemented.
VPMU has in fact a dual responsibility; in one hand (as the executing government agent) to bridge and work together with the development partners (companies), as on the other hand (acting as the government representative) implies providing internal feedback on projects’ physical and financial evolution to both the Finance and Infrastructure ministers, which is most relevant towards both financial management and control. So, we focus basically on Program Management and Contract Management.
Right now you are coordinating and overseeing the implementation of the projects which include: The Vanuatu Inter-Island Shipping Support Project, The Port-Vila Urban Development Project, The Port-Vila Lapetasi International Multi-Purpose Wharf Project, The Vanuatu Tourism Infrastructure Project and The Vanuatu Aviation Investment Project… What is/are the most significant/s project/s for Vanuatu’s economic development being undertaken that you would like to share with the international readership of HBR – among which are potential investors?
From the government’s perspective, port infrastructure plays a major role in contributing to economic development. The Lapetasi Multi-Purpose infrastructure Project currently financed by the Japanese International Cooperation Agency (JICA), being one example of a major international Port to be.
Recognizing that (for the islands), goods are as important as services, domestic port infrastructure is also most relevant, it enables remote access to those goods and services (air freights can be costly and deal only with small volumes), therefore developing a domestic shipping support program very important.
In addition to the ports, improving our road network in places like Port Vila or Luganville, which are the main gateways in Vanuatu is vital. In addition, having proper road infrastructure in place also helps developing the rural areas. We also have the Port Vila urban development project. The Tourism Infrastructure Project can be a heavenly-investment-context for many companies.
We also must understand that Vanuatu needs to work towards being part of the Global Economy, therefore airport infrastructure is equally important, working outside our “boxes”. We can, therefore shift from the traditional transportation routes like Vila – Sidney, in Australia or Vila – Suva, in Fiji, and go Vila or Santo directly to Asia (being the Asian market a high potential for our development). The way to go forward is to become more proactive in the development focus, but doing it in stages: starting with the ports, then moving to the airports while the road infrastructure will be a continuous process.
We must bear in mind that Vanuatu is an archipelago in opposition to Fidji or Samoa, we have more than 85% of our population in rural areas (remote areas). The government is required to take a holistic approach when it comes to infrastructure development. When speaking of Airport infrastructure, the focus will be upgrading Bauerfield to a code E runway; but still, there is the need to develop other associated supporting infrastructures (that can make the code E runway perfectly aligned with international standards), which is why we are also working on the new terminal. We can develop both, but not in an isolated manner.
All of this will enable fast tourism development but nowadays there are not enough hotels; still while developing the port infrastructure, we will be reducing indirectly materials’ cost as well as other goods and services, creating economic conditions for such structures to be developed. The Airport evolution aims bringing in bigger long route aircraft. We speak about developing the concept of “one stop shop”; currently people coming either from the east of the west need to come in through Australia, where there are immigration requirements that most tourists find annoying and therefore coming to Vanuatu is currently not so appealing.
Being involved in both international programs towards funding and compliance, means the additional need to review our legislation and therefore the participation and direct link to the government is so vital.
You have development partners such us: ADB, AUSAID, JICA and the New Zeland Aid Programme. There is no doubt that Vanuatu needs also partners in the form of private FDI to come together to continue funding and supporting important infrastructure investments. What are the major projects opportunities for potential investors?
Towards working with Public International Partners as well as the private sector, we have in place both legislation concerning the use of public funds as well as procurement processes that allow tenders to take place. For the ports, airports and roads projects, we have and still are applying in one hand our procurement processes (toward public entities), which is why we have contractors invited to submit bids, allowing an open competition.
On the other hand, towards the private sector, the government is focusing on the development of PPP (Public Private Partnership) incentives; and I would say that one example of such key PPPs is the case of JICA, where the Government provides the infrastructure and facilities but the entity is privately managed. The Government is also reviewing legislation to address the development of a similar model towards the Airports. However, the government will not participate in a manner that implies costs for the country (as any modern government works for the state and the state is “for the people”). Supporting this and promoting other investments, we have also the Vanuatu Investment Promotion Authority (VIPA) and the Tourism Office under the Minister of Trade and Tourism which contribute to create a rich and appealing investment environment for all potential investors.
The Millennium Challenge Corporation (MCC) – US - in 2006 signed a five-year, $65.69 million Compact with the Government of Vanuatu to reduce poverty and stimulate economic growth by targeting the country's poor transportation infrastructure. How have VPMU’s relations with the US developed since then?
The government’s foreign policy remains unchanged. The Compact funds are limited in time (as in the case of any other countries in the region). Vanuatu has been privilege to have been selected by the Millennium Challenge Corporation to benefit from the funds, but I believe our relationship with the US government remains unaltered (as in the case of other foreign governments). So, there are no restrictions; however, getting a second Compact program depends on the country ratings.