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Vanuatu: discover what matters

By Simeon Athy
Governor, Reserve Bank of Vanuatu

“If you are looking for a safe environment to retire and or to start up a business offshore in a more relaxed, safe and highly modern business environment then Vanuatu is the country that you should consider”

Brief country background

Vanuatu consists of a“Y-shaped” chain of more than 80 islands that is located about 1,750 km east of Australia, 500 km north east of New Caledonia and west of Fiji and south of Solomon Islands.

The country’s total land area is approximately 12,200 square kilometers and the territorial waters cover 450,000 square kilometers. Despite its small size (population and land mass), it is a developing nation with great investment opportunities.

The country gained its Independence from Britain and French in 1980 and self-governed itself under a Parliamentary democracy political system headed by a President, a Prime Minister (the head of the government) and 52 elected members of parliament.

Vanuatu is ranked amongst the top tourist destinations in the Pacific island region. Recently it was voted twice as the happiest place on earth by the Lonely Planet Index.

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Vanuatu has a positive economic environment and outlook

Vanuatu’s economy is sound amidst the current challenging global economic conditions, thanks to the strong macroeconomic and policy buffers of the authorities. The IMF’s latest assessment of the country’s performance (2013 Article IV Consultation Review ) showed that despite the lower level of aid and public investments, the country’s per capita growth is higher compared to the other Pacific Islands. Inflation level is maintained within a 0-4% range of annual growth of the CPI, country reserves are maintained well above the four months of import cover and the country’s public Debt to GDP ratio is low compared to the region and by international standards. 2014 real GDP growth is projected at 3.6 percent and is expected to gradually pick up in the years ahead, supported by the large donor infrastructure funded projects.

Government policy fully supports domestic investments and growth

There are a lot of untapped investment opportunities in the country’s agriculture sector, tourism industry, ICT and telecom sector and more. IMF in the same assessment above stressed that critical infrastructure investments both from the government and private sector are needed to enable the country develop these sectors to allow the country realize its full potential.

The Government recognises this critical area and has taken steps in recent years through the close cooperation and support from the donor communities to address them though its Policy Action Agenda. Earlier deregulation in the telecom and aviation sectors has boosted growth and improve the business environment but more remains to be done. A number of donor/ government large infrastructure projects will kick off in 2015 and onwards that will improve the investment climate of the country . Vanuatu is currently ranked 59 in the ease of doing business ranking, way higher compared to some of its peers in the region.

The Vanuatu government recognizes the need to enhance and sustain private sector led economic growth with its benefits distributed equitably within Vanuatu.

Stable financial system

Vanuatu’s financial system is stable and sound. Fiscal finances are strong, the domestic financial sector players mainly the four commercial banks (consisting of the subsidiaries and branches of the big names in the South Pacific region and Europe) operate under a competitive and well regulated environment.

The country presents one of the well-known offshore centers in the region that continue to attract legitimate and genuine investors. The Vanuatu government continues to cooperate and take important steps in ensuring that the Vanuatu Offshore center continues to fully comply with the international requirements on AML issues and other supervisory standards.

Banking sector offers many of the modern facilities that are comparable to many modern economies around the globe. The benefits that Vanuatu offer as a Tax Heaven are (i) Tax-friendly environment (ii) no income or company tax (iii) no capital gains tax (iv) no estate or death duties and (V) no foreign exchange controls.

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Vanuatu has a strong supervisory regime

The Reserve Bank of Vanuatu (RBV) plays a very critical role in the safe and sound operation of the financial system of the country. The Bank regulates and supervises the business of the domestic banks and offshore banks under the provision of the RBV Act , the Financial Institution Act, International Banking Act and a number of other legislative requirements. In carrying out this important role, the Bank follows internationally recognized supervisory methods and standards (licensing, offsite and on-site supervision).

Failure measures by banks and insurance companies declaring bankruptcy in Vanuatu is zero or near nothing because of this stringent approach. Vanuatu is a member of the Asia/Pacific Group on money laundering and counter terrorist financing in the Asia/Pacific region and is committed to continue to improve its measures to combat money laundering and terrorist financing. Vanuatu is committed to its international obligations and has enter into 14 Tax information Exchange Agreement with other jurisdictions.

 

Financial institutions are taking a active role in addressing inequality and poverty

Vanuatu is embracing financial inclusion to address inequality and poverty, and simultaneously promote financial stability and inclusive economic growth. The Authorities are increasingly conscious of the importance of improving access to finance the unbanked population, including for the low income households so as to improve their welfare and enable them to engage in activities that will support economic growth. However, achieving financial inclusion in an island country like Vanuatu is a huge task given geographical challenges, underdeveloped infrastructures and low financial literacy levels but positive outcomes are already showing and the government is fully committed to this.

Vanuatu has modernized its Vatu currency note series

Reserve Bank of Vanuatu issued in June 2014 three new banknotes in polymer (200, 1000 and 2000 Vatu banknotes). This modernized the currency family series of the country after 30 years in paper note substrate – placing the country amongst the latest in the world to modernize its currency and improved its image globally.

The design style of these latest releases follows the 10,000 Vatu denomination that was issued in polymer in 2010. The two last denominations that remain to be issued and complete the series in polymer are 5000 and 500 Vatu notes. n

1Vanuatu and Fiji successfully linked the submarine optical fibre cable (1,250KM) investment (US$ 30 million) between the two countries and Vanuatu to the world in January 2014. The high speed internet connection opened the door for e-commerce, e-education, e-government etc improving the investment climate of the country.

2Construction of the main wharf to accommodate the high influx of tourist cruise ships arrivals and wharfs around the islands for trading, the inter-island shipping, Port Vila roads, drainage and sanitation, Port Vila sea front face lift /beatification, international airport upgrades, Malekula and Tanna Islands roads and more.

 

Governor- Simeon Athy

Simeon Athy, Governor, Reserve Bank of Vanuatu

 

 

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