international trade and prospects for development of Vanuatu

What are the barriers to international trade for your country? 

Vanuatu suffers from being located in a remote region of the world, and this isolation hinders the country's ability to greatly expand trade due to the expense of transportation overseas. Many of the islands in the nation also suffer from minimal development and isolation. The country is prone to damage from natural disasters which likely staves off certain development. 

What strategy(ies) has your country implemented to overcome these barriers?  What strategy(ies) would you argue would be helpful?  Why? 

Vanuatu has set up favorable tax structures as well as creating a supportive environment in order to increase overseas investment into the country. The country has created and joined many trade organizations to overcome its isolated location as well as foster trade relationships in the international community. The country's high turnover in leadership positions needs to end in order to create a more stable government. This would provide a clear image to and increase confidence in overseas investors and governments that Vanuatu is ready and able to take steps towards implementing policy without worry that any progress will be halted due to sudden government changes. The government can initiate greater infrastructure investment or subsidize the cost of trade in order to create more favorable transit pricing when doing business from Vanuatu. The country can also invest in greater natural disaster proof industries and infrastructure in order to minimize impact from these events. 

What is your country's history of dealings with the IMF and/or World Bank?  How have these dealings been helpful and/or not helpful?  Explain.

Vanuatu is a member of both the IMF and World Bank, taking aid from these international organizations. The IMF just concluded a mission in 2018 to the country to help with the recovery and economic sustainability efforts after a cyclone in 2015. The IMF achieved its goals within the country for GDP growth and infrastructure and industry recovery. (IMF Staff Concludes) The World Bank is also helping the country, maintaining the Vanuatu Aviation Investment Project with almost $60 million in funding to develop, train, and maintain the operational oversight of international travel as well as developing infrastructure. (Projects: Vanuatu)

Work Cited

Jamie Tahana. "Vanuatu's government faces one of its toughest tests yet." Radio New Zealand. 10 Nov. 2018. Web. 12 Feb. 2019. <https://www.radionz.co.nz/international/pacific-news/375617/vanuatu-s-government-faces-one-of-its-toughest-tests-yet>

N.a. "Australia - Oceania :: Vanuatu — The World Factbook - Central Intelligence Agency." Cia.gov. 31 Jan. 2019. Web. 12 Feb. 2019. <https://www.cia.gov/library/publications/the-world-factbook/geos/nh.html>

N.a. "IMF Staff Concludes 2018 Article IV Mission to Vanuatu." IMF. 7 Feb. 2018. Web. 21 Feb. 2019. <https://www.imf.org/en/News/Articles/2018/02/07/pr1839-imf-staff-concludes-2018-article-iv-mission-to-vanuatu>

U.S. Department of State. "Vanuatu." U.S. Department of State. n.d. Web. 21 Feb. 2019. <http://www.state.gov/r/pa/ei/bgn/2815.htm>

Vanuatu IPA. "Infrastructure - Vanuatu IPA." Vanuatu IPA. n.d. Web. 12 Feb. 2019. <http://www.investvanuatu.org/wp/industries/infrastructure/>

N.a. "Projects : Vanuatu Aviation Investment Project | The World Bank." Projects.worldbank.org. n.d. Web. 21 Feb. 2019. <http://projects.worldbank.org/P154149?lang=en>

Vanuatu Trends, Institutions, and Government

Vanuatu Trend Data The few statistics signify though that Vanuatu's GDP appears to be on an upward trend possibly signifying greater development and growth of the country's economy. The Vanuatu GDP has maintained a growing growth rate after a decline in 2009 and 2015. The GINI index data point from 2010 of 37.6 signifies a greater equality of wealth distribution and the Human Development Index of .603 is continuing to increase. This low inequality and growing development and GDP shows that the country is improving economically with the people of country gaining from this growth. N.a. "GINI index (World Bank estimate) | Data." Data.worldbank.org. n.d. Web. 8 Feb. 2019. <https://data.worldbank.org/indicator/SI.POV.GINI?end=2010&locations=VU&start=2010&view=bar> N.a. "GDP growth (annual %) | Data." Data.worldbank.org. n.d. Web. 8 Feb. 2019.

N.a. "| Human Development Reports." Hdr.undp.org. n.d. Web. 8 Feb. 2019.

N.a. "GDP (current US$) | Data." Data.worldbank.org. n.d. Web. 11 Feb. 2019.

Vanuatu Government and Political Stability

Vanuatu is a parliamentary republic that consists of a central government for the nation with a president, prime minister, and parliament and traditional leadership roles such as regional chiefs. The presidents holds a mostly honorary role, elected by the Parliament and Regional Councils to serve a five year term. Parliament consists of 52 members serving four year terms and elected through elections across the nation with proportional representation. The Prime Minister is elected by Parliament and is able to select members for their cabinet from within the Parliament.

The nation has many political parties that often split or change sides which has caused constant changes in leadership and instability in the government. Due to these changes of branching and new party majorities, there has been high turnover for the Prime Minister with recurring votes of no confidence shaking this leadership position.

Vanuatu Institution Strength

• ​​the banking system
• the legal system
• the education system
• infrastructure
• international relationships.
• market instituions

Vanuatu maintains a central bank and currency—the Vanuatu Vatu. Locally, it is allowed for people to use goods or alternate currency as exchange such as the livatu, equivalent to a fully carved boar tusk. There is presence of overseas banking in the country due to the nations laxer tax regulations (being previously known as a tax haven), providing accounts for international companies, especially from Australia and New Zealand.

Vanuatu's legal system consists of supreme court and court of appeals and lower courts. Magistrate rule on most legal procedures and island courts are placed in villages and run by the chief to act on questions regarding customary law. These courts are built upon a mix of British Common and French Civil Law.

The country has a multiple universities within the country, and spends 5.5% of the GDP towards education. The population has a 85.2% literacy rate being slightly higher for men than women. The education system still needs development as the average years of schooling for boys and girls is 10.9 years.

Vanuatu has developed and maintained domestic infrastructure, hindered towards further development by lack of access to markets. Port Villa and other major cities maintain paved, tar roadways, ports, and other necessary infrastructure. Though 80% of the country is only developed for the domestic trade that takes place with little access to the greater world.

Vanuatu has joined many international organizations, especially those involving the asia-pacific region and islands. Australia, New Zealand, China, and other countries in the region have formed close ties with the country becoming valuable trading partners and receiving aid packages.

Vanuatu Trends, Institutions, and Government

The overall uncertain trend of the GDP and slow growing HDI of Vanuatu can be attributed to its lacking infrastructure and literacy and education rates hindering fast growth within country. The political instability from constant leadership turnover likely contributes towards the slow growth as the implementation of new policy and changes slows. The occasional sudden drops in GDP growth could be due to this political instability or to the fragility of the Vanuatu economy as it the country is highly susceptible to natural disasters and global trends. The revenue gained from overseas banking, agricultural, and commodity exports are at risk due to the changing global demand for these products as well as international pressure to close loopholes and benefits. Vanuatu's government is being pushed towards greater stability which will move the country towards promoting greater infrastructure investment across the country and continued growth among the GDP and HDI.

Work Cited

Jamie Tahana. "Vanuatu's government faces one of its toughest tests yet." Radio New Zealand. 10 Nov. 2018. Web. 12 Feb. 2019. <https://www.radionz.co.nz/international/pacific-news/375617/vanuatu-s-government-faces-one-of-its-toughest-tests-yet>

N.a. "Australia - Oceania :: Vanuatu — The World Factbook - Central Intelligence Agency." Cia.gov. 31 Jan. 2019. Web. 12 Feb. 2019. <https://www.cia.gov/library/publications/the-world-factbook/geos/nh.html>

N.a. "| Human Development Reports." Hdr.undp.org. 8 Feb. 2019. Web. 12 Feb. 2019. <http://hdr.undp.org/en/countries/profiles/VUT#>

N.a. "OEC - Vanuatu (VUT) Exports, Imports, and Trade Partners." Atlas.media.mit.edu. n.d. Web. 12 Feb. 2019. <https://atlas.media.mit.edu/en/profile/country/vut/>

N.a. "Reserve Bank of Vanuatu." Rbv.gov.vu. n.d. Web. 12 Feb. 2019. <http://www.rbv.gov.vu/>

N.a. "Vanuatu : Constitution and politics | The Commonwealth." Thecommonwealth.org. n.d. Web. 11 Feb. 2019. <http://thecommonwealth.org/our-member-countries/vanuatu/constitution-politics>

Vanuatu IPA. "Infrastructure - Vanuatu IPA." Vanuatu IPA. n.d. Web. 12 Feb. 2019. <http://www.investvanuatu.org/wp/industries/infrastructure/>

Vanuatu GDP by Sector, Important Exports, Implications of Falling Commodity Prices and Deteriorating Terms of Trade

Composition of Vanuatu’s GDP by sector (% agriculture, industry, and services). (Source: CIA World Factbook)

Agriculture: 27.3% (2017 est.)

Industry: 11.8% (2017 est.)

Services: 60.8% (2017 est.)

Vanuatu's Important Exports (Source: Observatory of Economics Complexity)

Read Blink pp. 325-328.  Discuss the implications for your country of falling commodity prices and deteriorating TOT.
Implications for Vanuatu of falling commodity prices and deteriorating TOT.

A large portion of Vanuatu GDP and economy is made up of commodities (mostly animal products) and as commodity prices fall, the terms of trade (TOT) will deteriorate as the price for exports decreases. This deteriorating TOT will mean that a larger quantity of exports will be needed to balance out with the prices of imports. Vanuatu may have an inherent advantage in the animal products (fish) being sold due to the geographical location of the country. But the nation currently maintains a negative trade balance and already imports more than their amount of exports. This negative balance will likely continue and be made worse by falling commodity prices and the deteriorating TOT forces the country to either start producing more for less.

Vanuatu Net Barter Chart and Export Buying Power Change

How did the buying power of the country’s exports change over this period of time?

Vanuatu suffered a decline in buying power until 2011 and has been on an upward trend since.