AID FOR TRADE THE VANUATU EXPERIENCE Prepared by

AID FOR TRADE  THE VANUATU EXPERIENCE Prepared by

AID FOR TRADE THE VANUATU EXPERIENCE Prepared by Jennifer Kalpokas Doan and Matthew Harding Governance for Growth Program Australian High Commission, Port Vila, Vanuatu October 2016 AID FOR TRADE: THE VANUATU EXPERIENCE 1. 2. 3. 4. 5. Country context and background

Aid for Trade Australian bilateral assistance Challenges Q&A Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 2 VANUATU CONTEXT - Pop ~ 250k - 65 inhabited islands - Rural population (80%), reliance on subsistence/semi-subsistence agriculture - Young population, high population growth (2.7%)

- 52 MPs, unstable coalition governments VANUATU CONTEXT Relatively strong economic performance Track record of economic reform, but sporadic Stable macroeconomic management GDP (2014) Agriculture, Fishing and Forestry (27%) Industry (9%) Services (64%) Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 4

TRADE IN VANUATU Export Share of GDP 60 50 40 30 20 10 0 Vanuatu Fiji Solomon Islands Tonga

Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 5 Samoa TRADE IN VANUATU Tourism dependence (share of tourism receipts in total exports) 90 80 70 60 50 40 30

20 10 0 Vanuatu Fiji Solomon Islands Tonga Samoa TRADE IN VANUATU Exports highly dependent on services, particularly tourism Other main exports are coconut products, beef, kava and cocoa High import dependence, particularly basic

food products (rice, flour), manufactured goods and petroleum products Trade Policy Framework Governments overarching policy on trade National Trade Development Committee Mainstreaming efforts are well coordinated Nationally recognised and GoV endorsed authority on trade policy decisions Broad membership across GoV, Private Sector and NGOs Trade Development Division

Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 8 Dept. of External Trade DFAT AUD 1m over 3 years VSTAP (NZAID) a tourism investment program of NZD

6.4m over 4 years Trade Developm ent Division EIF Tier 2: Reconstruction of the Sea Front for a tourism precinct Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 9

EDF11 E 35m over 5 years. 50% Agricultural productive sector 50% Trade value adding activities managed by TDD EIF Tier 1 : Institutional Capacity strengthening AUSTRALIAN BILATERAL AFT ASSISTANCE Infrastructure R4D & PVUDP Roads for Development $51m over 8 years PVUDP $31m over 5 years Education - TVET

$ 22m since 2008 Governance for Growth $23.3m over 4 years Economic Engagement in Australias Development, Diplomatic and Trade Portfolios 10 CHALLENGES Governance and political stability Erratic policy making Short time horizons Limited national vision Relatively narrow economic base Limited industry/value adding opportunities Reliance on tourism

Subsistence agriculture High trade exposure, potential to create macro challenges CHALLENGES Absorptive Capacity Logistics, coordination Human capacity, small local private sector Government capacity Land, access to finance

Politically sensitive How to decouple? QUESTIONS Internal vs External Trade? Exports and/or import replacement strategies? Can niche opportunities drive growth and development? Reliance on tourism risks? Role of labour mobility/migration? Role of trade agreements?

THANK YOU, QUESTIONS?

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