Countries and Regions

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p. 3 of 5 BACK | NEXT I. Country Strategy II. Current Development Trends and Issues III. Implementation of the Country Strategy and Program IV. Portfolio Management Issues V. Country Performance and Lending Level

Country Strategy and Program Update 2003-2005: Vanuatu

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III. Implementation of the Country Strategy and Program

A. Poverty Reduction

18. Vanuatu, with a human poverty index of 46.4, is ranked the third poorest country among PDMCs. With a human development index of 0.425, it also scores poorly in social development. To address these issues, the Government has been invited to participate in a poverty partnership agreement (PPA) with ADB. The PPA will seek the Government’s commitment to analyze poverty; develop appropriate strategies to reduce it; and implement these strategies through the country’s development plan, strategies, and priorities. ADB is helping Vanuatu prepare its poverty reduction strategy. A participatory poverty assessment has been carried out under a regional technical assistance (RETA).³ Before the end of 2002, poverty lines and targets in achieving the Millennium Development Goals (see Appendix 2, Table A2.3) will be identified. An ongoing technical assistance (TA) on performance improvements in service delivery units will help strengthen the efficiency and effectiveness of selected frontline public services, including education, health, and information on trade opportunities; a proposed loan project for outer island infrastructure development will help improve accessibility to markets and social services; and TA projects for technical vocational education and training (TVET) and gender-based rural skills development will help improve the labor force, reduce unemployment, and increase cash income. ADB will also seek funding for poverty mapping to identify the communities left behind and help target assistance.

B. Progress in the Country Strategy and Program Focus Areas

1. Economic Growth Management

19. Two reports prepared with ADB assistance—Vanuatu: Economic Performance and Challenges Ahead⁴and Financial Sector Development in Pacific Island Economies—are helping the Government and its development partners identify economic growth opportunities and policy issues. An economic action plan is being developed using the two reports as the basic points of reference. Under another TA,⁵ methods to enhance revenues have been identified. Support may also be provided for helping the National Bank, Provident Fund, and AMU identify the next steps in their development. TA is ongoing to help strengthen the National Statistics Office (NSO) and is planned for 2003 to help prepare a midterm strategic framework linking the CRP policy matrix with corporate planning, project approval, and budget issues. In 2004, TA will help strengthen the legislative framework for the financial sector, including aspects related to harmful tax practices and money laundering.

2. Good Governance

20. Although the institutional and legislative framework for good governance has been very substantially enhanced since 1998, it still has many shortcomings. The public service remains weak, and the police, courts, prosecutor-general, solicitor-general, and attorney-general are severely overburdened. Methods to retain senior civil servants and to enhance the performance of most public sector agencies must be identified urgently. The recent proposal to use performance agreements for directors-general and directors will help in this regard. ADB has supported capacity building of the SLO since 1999, significantly helping improve the rule of law and prevent money laundering and financial fraud. If requested to do so, ADB will continue to strengthen the Financial Intelligence Unit and implementation of OECD measures against harmful taxation practices. AusAID is supporting the Public Service Commission and recently started supporting the police and the legal sector. AusAID and possibly other donors are expected to replace ADB support to the SLO. Parliament will be strengthened by an ADB TA to improve the functions and procedures of sector standing committees, standing orders governing legislative procedures for review and discussion of bills, and functions of clerks. The ongoing TA to improve service delivery unit performance will help make several key agencies more effective.

21. Involving communities in the reform process will engender their support and ownership. The National Task Force and National Summit meetings held in 1998, 2000, and 2001, were excellent opportunities for communities to participate in reviewing and assessing the progress of the CRP and in setting new strategic directions for reforms. ADB assisted the summit meetings and their preparatory work, and has been asked to assist them in the future. ADB will help ensure that business groups, civil-society organizations, and women’s groups in particular, are more involved in discussions of strategies and action plans and that projects focus more on social development for equitable distribution of the benefits of economic growth. ADB has helped assess the social and economic impacts of the CRP, working through community groups and nongovernment organizations (NGOs). Government has recently committed to organizing sectoral task forces and working groups, including a business forum to discuss major reform policies, and organizing regular provincial summits to discuss community participation in improving service delivery to rural areas. The regional economic development initiative and implementation of the recent report of the Decentralization Committee will help give local communities a greater say in the affairs of government.

3. Private Sector Development

22. Although the private sector should be the main engine for growth, private investment has not picked up as anticipated. Foreign investment remains low despite the efforts of VIPA to provide one-stop services such as giving out licensing information. Difficulties in starting a business stem from unstable policies and their administration, the land tenure regime, lack of skilled labor, and lack of security over property, which together discourage investment, job creation, and economic growth. The monopolies and oligopolies in the banking sector and in commodity distribution must be dismantled. ADB and New Zealand have offered to help conduct a participatory business forum.

23. An ADB RETA⁶ and the Foreign Investment Advisory Service are supporting the mapping of administrative barriers to investment and improvement of business advisory services. A project preparatory TA (PPTA) in 2003 will then help prepare a private sector development project, followed by the project in 2004. An advisory TA (ADTA) is being processed to help strengthen the policy framework and build administrative capacity in the agriculture sector. The ADTA will be followed by a PPTA in 2004 to help prepare an agricultural development project, tentatively programmed for 2005, which will support the development of private sector activities in the agriculture sector. The proposed outer island infrastructure development project (OIIDP) will support tourism development and private sector development by facilitating the movement of people and the flow of agricultural products to domestic and international markets.

4. Infrastructure

24. Inadequate transport infrastructure is a core obstacle to economic growth, particularly on the outer islands. To help remove this constraint, the OIIDP is being processed for 2003. It will focus on upgrading priority rural roads, airstrips and wharves on the outer islands, and creating sustainable institutional and financial arrangements. Communities will be widely mobilized for project implementation and regular maintenance of the infrastructure. The project will have significant impacts on local economies and their transformation into cash economies. The Government has also requested support to prepare an urban sanitation and public health project, following the outline of a master plan developed earlier with ADB assistance.⁷ It will help remedy environmental pollution and poor drainage and sanitation services in Port Vila. A PPTA will be provided in 2005 to help prepare the project.

5. Human Resource Development

25. Among the Pacific countries, Vanuatu has some of the lowest human development indicators. Basic and secondary education, which are inadequate in quantity and quality (see Appendix 2, Table A2.4), are being supported by Australia, France, and European Union. The World Bank has been considering a sector project focused on basic education. However, it is becoming apparent that greater domestic resources must be devoted to improving the sector. To provide better-trained labor and enhance job opportunities, an ADTA will be provided in 2003 to help prepare a TVET sector policy framework. In addition, a TA for gender-based rural skills development is planned for 2004.

6. Gender and Nongovernment Organizations

26. Vanuatu has a wide range of international and domestic NGOs, some deeply involved in development. The Chamber of Commerce and Industry has underway a series of programs to help develop the primary sector, including forestry (2002), livestock (2003), and marine resources (2004). It will be supported by ADB’s involvement in the agricultural and private sector development areas. Men have much more access to resources and entitlements than women, who are disadvantaged socially, economically, and politically. Rural women are especially disadvantaged, and women’s groups are demanding more participation in various activities. The CRP supports gender equity. The proposed TVET TA will support the development of NGOs, including the National Training Council and informal rural training centers. A TA for gender-based rural skills development will be implemented through NGOs.

7. Environmental Protection

27. Pressures on land and the marine environment—reef depletion, soil erosion, water contamination due to poor waste disposal, watershed damage and substantial climate variation—have become visible only in recent years (Appendix 2, Table A2.5). Continuing urban migration has given rise to slum communities without adequate water, sewerage, and waste management systems. Environment legislation has been drafted with ADB assistance⁸ and should be approved in late 2002. An ADTA is proposed in 2004 to help build capacity for environmental management, including monitoring and regulating waste and sewerage discharges and monitoring water quality.

C. Highlights in Coordination of External Funding and Partnership Arrangements

28. Since the CRP was launched, ADB has been pivotal in coordinating donor assistance for Vanuatu. In addition to convening regular in-country meetings of all donor representatives based in Port Vila, ADB also convened the first Consultative Group Meeting (CGM) for Vanuatu, in Noumea in July 1997. The Government wishes to have the second CGM as soon as possible. Monthly meetings are held with donors to help monitor developments and shape partners’ development assistance. Existing and potential areas of close cooperation and potential cofinancing include agriculture, physical infrastructure, business development, revenue enhancement, statistics, economic management and governance.

29. Vanuatu’s key development partners, in order of amount of assistance, include AusAID, New Zealand Agency for International Development (NZAID), the European Union, and France. Although the largest share of donor support is for education and infrastructure, donor support is provided also for economic and public sector reform, private sector development, gender and youth activities, environment and agriculture (See Appendix 2, Table A2.6).

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