Comments

Thanks Wenny. Agree with what you say about institutions, particularly healthcare and education. The ideas I raised were all simply short-term ones, but in the long-term, fixing education outweighs absolutely everything else. The only thing I'd pick up on is copra. It is a lot of work for not much money, and exports are way down (just 195m to June, compared to VUV 1,811m in 2017 at its peak. The CRB and low prices have been devastating for this. I don't think copra can therefore be really seen as a primary economic pillar any more.

The best analysis of the Forum that I've seen for a while. Honest and realistic for moving forward.

Solid reflections on a period of pacific regionalism that tested its resolve and the political will of its members. You are absolutely right about "taking critiques on the chin, and yet you go to work wanting to do more" - malo lava!

Hi Peter, thanks for the great article. We (Vanuatu) need to move faster if we truly believe we can cut out the mindless and repetitive paperwork and the associated costs that grind this country to a halt in virtually every department. The time for studies and surveys is over and it is time for change or get left behind. We should embrace the Nomad workspace culture, not only does this bring foreign investment and spending into the country, it also highlights the great opportunities here in Vanuatu for tourism and lifestyle. To entice people to visit here and create opportunities for working abroad we should consider some of the work visas and minimal or zero tax obligations that many European countries have implemented to encourage foreign income and spending which in many cases would outweigh taxable income. There have been some previous articles on the various categories of VIPA and how they discourage this type of travelling entrepreneur or business person and the current system and mindset is likely to drive many who have chosen to live and work here to look for greener pastures. I know a few...

Thanks Peter This discussion directly addresses the challenges and opportunities facing Vanuatu's economy. A significant obstacle remains the ongoing land dispute, which has hindered investments. However, I believe the foundation lies in understanding our economic institutions as well. Question to think around it in terms of: Do people trust the current economic system and government ( to pay tax)? If copra and kava are our primary economic pillars, how can we boost production to enhance market confidence, for people to trust the market and continue producing? Ultimately, it depends on people's reactions and behaviors. Do they trust healthcare to have more children ( raise the population growth rate? Do they trust education to invest in their children's futures to be educated? These questions highlight the interconnectedness of economic institutions especially further looking at the culture, trust, and norms in Vanuatu.

Its good that our poor parents have tried there best in getting the Independence on a Golden plate that we are enjoying today, may our good Lord bless you all in peace.

I agree Henry. It is too simplistic to point to an increased VAT without looking at the expenditures side, transfers and tax expenditures, and indeed other tax options such as digital services tax. What will be the social impacts of different tax and tax expenditure options.

Hi Peter, while I agree with the need to increase government revenue, I do not think we need to increase VAT. We cannot continue to put extra burden on consumers without controlling the leakages. Those leakages need to be fixed, and we need a holistic review on our current fees and charges. Four decades ago, the government budget was less than 10 billion, yet most of the basic services such as schools, hospitals, airports and etc are up and running. Four decades later, most of them are now in the verge of collapsing yet, the government budget has now increased them by nearly a 1000 percent. Why? The government has received twice, or more aid from developing partners, unfortunately, most of the citizens do not feel that their livelihood has improved. Maybe in papers and reports, but the reality seems otherwise. So, I do not think increasing VAT should be an option.

Thanks Dr Phillip. And I completely agree with what you say here. GDP is just one metric, and far too many of the world's current problems have stemmed from an obsession with growth, often ignoring or forgetting what really matters (health, community, environment, etc.). As just one example, current extinction rates are estimated to be 100 to 1,000 times higher than natural background rates due to human activity. At the same time, country's need a minimum level of wealth/income to be able to provide the basic services to an acceptable standard, and Vanuatu is simply not rich enough. The literature suggests that a GDP/capita of about USD 10,000 is needed for this, and Vanuatu is only 25-30% of that. There is a good argument to be made that the customary economy (which must be preserved) means that this level would be lower in Vanuatu, but conversely the costs associated with geography and natural disasters may mean it is higher. But the main point here is that it is clear Vanuatu is not rich enough to provide these services, and so growth is needed for Vanuatu. But it is not endless growth that is needed - indeed the only thing that keeps on growing is cancer! We must make sure that it is good growth - inclusive and fair to both people and nature. Always happy to talk more over a coffee, and happy biological diversity month 🙂

Thanks Henry. I agree on the need to reduce unnecessary spending and implement public sector reform, but at the same time, I still believe more revenue is needed to a) fund core services (especially education) and investment and b) to improve the business environment to enable investment and growth. Vanuatu is an extremely expensive country to operate in, and the Govt needs revenue. With no income tax, and with citizenship revenue falling, it has to come from somewhere.

Thanks David. Income tax for Vanuatu is a minimum 5 year project to implement, and doesn't solve the immediate revenue issues. The economy is also (in my opinion) too small and the business challenge too challenging for an income tax tax to make sense. Unleash the power of cheap energy (solar + battery), move as much of Government online as possible, resolve the skills issues, let the economy grow rapidly, and then I think it makes sense to introduce a well-signaled income tax.

I'm facing the same problem too.