A dip into the unknown: why investors are eyeing Vanuatu

Vanuatu has no parking meters and no traffic lights – a symbol, say residents, of a laid-back lifestyle free from many of the hassles of modern urban living. Investing is also straightforward, according to business leaders, thanks to minimal rules and taxes. So with economic growth rates of 4.5% predicted for the next 10 years, is the time right to consider Vanuatu?

Martin St Hilaire, chairman of the Vanuatu Financial Centre Association and partner at accounting and business adviser AJC, says: “Vanuatu has a small state and a minimum of rules and regulations. It has no income or capital gains tax and residents do not even have to lodge an annual tax return; it simply doesn’t exist here.”

Many in the country hope that it will stay that way. There is a discussion going on about the introduction of income tax and there are regulatory issues to be sorted out in relation to the offshore financial centre (see article on page XX). But in the main, Vanuatu has a light touch when it comes to officialdom, making it attractive to investors.

Opportunities available

So what are the opportunities in Vanuatu? Tourism is the biggest, but there are also prospects in agriculture, fisheries, forestry and manufacturing.   

Vanuatu is an archipelago of 83 islands located east of Australia in the south-west Pacific. It has a population of about 290,000, of whom 35% are under 15 years of age and only 6% above 60. The capital, Port Vila, is located on the island of Efate, while the largest island by area is Espiritu Santo, which boasts one of the region’s most famous beaches, Champagne Beach.

Other tourist attractions include the accessible and active volcano Mount Yasur on Tanna Island, jungle walking to the Millennium Cave in Espiritu Santo and snorkelling off Hideaway Island, close to Port Vila. Vanuatu receives about 120,000 tourists a year flying in for holidays, with another 300,000 spending a day or two on the islands as they visit from cruise ships. Tourism contributes about 40% of GDP and one-third of formal employment.

“Vanuatu is currently a frontier market for tourism but is well on the path to graduate to a significant emerging market, tourism-wise, in the next five years,” says Mr St Hilaire.

Upgrading tourism

Though considerable infrastructure investment is in the pipeline in terms of a new wharf and seafront beautification in Port Vila, and with plans to upgrade Bauerfield International Airport, there is still a need for more hotels, golf and conference facilities. 

“Tourism is the key sector for the country and the government is focusing its resources on it. We would like to have one more four- or five-star hotel in Port Vila and one more on Espiritu Santo,” says Raymond Vuti, manager of the promotion division at the Vanuatu Investment Promotion Authority. The four-star Ramada Resort Port Vila is set to open in April.

As is the case with other South Pacific countries, Vanuatu is seeing a lot of interest from Chinese investors, and the Chinese-backed Sino-Van Fish Processing Plant aims to process and export tuna. Despite a huge exclusive economic zone (UN designated sea area), Vanuatu has hardly exploited its maritime wealth.

Cocoa beans, copra and kava are other local products that hold interest for foreign investors, and unskilled labour hourly rates of Vt170 an hour (about $1.50) are very attractive. There are many reasons, it seems, to explore Vanuatu.