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Annual Report 2002 : Pacific

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Vanuatu

Economic performance

Vanuatu’s economic performance declined by 0.3% in 2002, compared with the revised estimates of negative 2.7% in 2001. The tourism industry was negatively affected by local currency appreciation; closure of Air Vanuatu’s direct connection to Melbourne, Australia; and competition from a rapidly recovering and lower-cost tourism industry in the Fiji Islands. Beef exports declined due to the economic slowdown in Papua New Guinea and the economic collapse in Solomon Islands. Timber and kava exports also declined. Copra production, on the other hand, recorded growth of 7.1%, mainly due to domestic subsidies and the absence of major cyclones during the year.

Macroeconomic conditions remained positive: the inflation rate was low at 2% and the balance-of-payments position was sound.

ADB operations

Operational strategy: ADB’s strategy focuses on improving economic management and governance; ensuring access of the poor, both rural and urban, to jobs and essential services; and creating an enabling environment for private sector development. ADB plays a major role in aid coordination, particularly economic and governance issues. Despite the abundant natural resources, Vanuatu’s growth suffers from frequent policy shifts, civil unrest, high costs of doing business, and difficulties in enforcing contractual agreements. The adult literacy rate is only 34%; primary and secondary school enrollment rates are low; and access to health services, particularly for women and children, is limited.

Policy dialogue: ADB played a prominent role in Vanuatu’s development effort by helping the Government prepare for its national summit on comprehensive reforms, and develop an agenda aimed at strengthening and accelerating the pace of economic reforms. Ways to improve the environment for private business and to reduce poverty were identified. ADB encouraged the Government to strengthen oversight of financial institutions, and helped prepare environment and water resource management legislation.

Loans and technical assistance: No loans were approved in 2002. Two advisory technical assistance totaling $450,000 were approved
(see tables 24 and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1981, Vanuatu has received nine loans totaling $51.3 million, of which one was active at the end of 2002. Contract awards totaled $152,000, bringing the cumulative figure to $47.9 million. The contract awards ratio for 2002 was 98.7%—higher than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $512,000, bringing cumulative disbursements to about $49 million. The disbursement ratio was 100.0%—higher than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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