SNAP ELECTION 2022 NEW GOVERNMENT, NEW DIRECTIONS OR BUSINESS AS USUAL
2022 Snap Election overview
The final results of the 2022 snap election were release on Sunday evening of the 23rd October. 14 out of the 52 sitting Members of Parliament lost their seats with the majority of the existing MPs returned. 10 new MP’s and 4 former MP’s including 2 former Prime Ministers won seats in the new legislature.
Poor voter turnout
The Dissolution of Parliament and the snap election caught many unprepared and as a result, only 219 candidates contested compared to 291 in the 2019 General Election. In addition to this, voter turnout was lower both in numbers and as a percentage of registered voters. In 2019, there was a total of 277,373 registered voters with valid votes of 141,311, a % turnout of 50.95%. In comparison to this in the 2022 Snap Election, there were 302,258 registered voters with valid votes of 132,331, a drop of nearly 9,000 votes and a much lower turnout of 43.78%. There have been a few possible reasons for the lower turnout. Some commentators have speculated that numbers may have dropped due to large numbers of ni vanuatu based overseas in seasonal work. However, since 2019, the number of seasonal workers has only increased by 3,000. Other possible reasons is the increased apathy amongst young people towards the political class. Whatever the reason, the effect of this has been to return a majority of the previous legislature but with changes to the balance of power between the main political parties
Winners and Losers
Vanua’aku Pati (VP) and the Union of Moderate Parties (UMP) have each secured 7 seats. The big winners in this election have been the UMP on the island of Efate who won 5 seats on Efate and 2 other seats on Tanna and Malekula for a total of 7, an increase from 5 with increased numbers of votes. Other winners have been the Rural Development Party who secured 4 seats. The big losers in this election have been both Graon Mo Jastis Pati (GJP) and Leaders Party (LPV) experiencing falls in vote numbers and seats won. With the VP, it has been a mixed result. Despite securing the highest number of votes for the whole of Vanuatu, with 20,511 votes it was only able to maintain the same number of seats (7) as 2019, failing to secure seats in some constituencies that they should have been successful in. On
Efate, it obtained over 3,200 votes but was unable to win a seat due to 4 candidates contesting. The last seat on Efate won by UMP received 1533 votes. In the Malekula Constituency, VP won the most votes with over 2,200 votes, but was only able to secure one seat due to votes being split amongst 3 candidates. The last seat won on Malekula, was secured with 726 votes. Similarly, on Santo, it secured the most votes but was only able to win a single seat despite having the numbers to secure 2. In total VP secured 8,776
votes between the 3 constituencies of Efate, Malekula and Santo but were only able to win 2 seats. It was a tactical mistake on the part of the campaign strategists to run so many candidates.
After a notable absence since 2008 of Women Members of Parliament, Gloria Julia King from Mele who contested under UMP was able to win a seat for the constituency of Efate. Also, for the first time in the history of Vanuatu, a naturalized citizen of Chinese ethnicity was elected to Parliament. Jesse Luo, who is the husband of the late Wendy Himford contested under the UMP and was able to secure the fifth seat on Efate with 1533 votes. Himford was a former SG of UMP.
Formation of the New Government
At the time of writing this article, two groupings have emerged centered around the 2 parties with the highest number of seats. It was clear when both VP and UMP emerged with equal numbers of seats that it would be difficult for the former Coalition partners in the last government to agree to work together when both parties would have demanded the position of Prime Minister.
The UMP, led by former Deputy Prime Minister, Ishmael Kalsakau moved quickly and has formed an alliance with the former opposition group comprised of Leaders Party, (LPV), led by Jotham Napat, Reunification Movement for change (RMC), led by Charlot Salwai, and Graon Mo Jastis Pati (GJP) led by Ralph Regenvanu. This grouping has claimed to have the support of 30 elected members and have based themselves at the Aquana Resort.
If a government is formed with the alliance led by UMP, it is likely that the new Prime Minister will be Ishmael Kalsakau. Key cabinet positions will likely be held by the main partners in the group comprised mainly of the former opposition with key economic portfolios to be held by Charlot Salwai, Ralph Regenvanu, Jotham Napat and former Prime Minister, Sato Kilman. It will be a different looking Council of Ministers. Whether a coalition government formed under this alliance will remain solid remains to be seen, as there has been a history of animosity between Kalsakau and the new members of this group.
The other grouping who have been left out have formed around the Vanua’aku Pati, comprising mainly of the Rural Development Party, and independents. This grouping has based themselves at Iririki Island Resort and has also been claiming the support of some members that are in the UMP camp, so it would appear that there are some newly elected MPs whose allegiances are unclear. At the time of writing this report, the Aquana Grouping appear to have the numbers and have repeatedly declared their solidarity
New Directions or Business as Usual
Whatever government is formed when Parliament meets, there will be some rather urgent decisions to be made concerning the future Economic Agenda of Vanuatu. As the country slowly rebounds from the economic downturn due to the COVID Pandemic, a new government will find itself confronting a number of key economic policy decisions. First on the agenda would be how it manages the conundrum of the National Airline. Air Vanuatu has been facing mounting criticism over flight cancellations, bad inflight food and generally poor services. This has been mainly due to the airline being under capitalized and it urgently needs an injection of liquidity. A UMP led government may see a new Board and the return of Jean Paul Virelala to a senior management position in the airline with the new government needing to decide whether it will continue to provide financial support to Air Vanuatu or undertake a restructuring and leave the aviation transport sector to the private sector. The former Chairman Sam Firi, contested the Snap Election as an Independent and was not successful.
Second on the Agenda will be the subject of minimum wages and severance. Currently, the minimum hourly rate is VT220 per hour. With rising costs of living, many workers on minimum wages have found it difficult to cover everyday costs of living. Increases in the price of basic import staples like rice and flour have pushed up prices for food. There will be pressure on the government to increase the minimum hourly rate in a way that will not affect the economic growth of the country. Business houses will face increased wage costs as a result and this in turn could affect private sector investment, employment and growth. There is no doubt that an increase in the minimum is needed. How much the increase will be will depend upon discussions between the The Tripartite Labour Advisory Council (TLAC) and what can be agreed.
What is of greater concern to the business community is the proposed increase of severance pay from one month for each year of service to two. If this is introduced and made retrospective, the effect of this on the business sector will be devastating and may even push many businesses who have survived through the Pandemic to bankruptcy.
Rising costs of fuel has also placed pressure on owners of public transportation which in turn has put the spotlight on bus fares which are currently at 150 vatu. Any increase in the cost of bus fares will directly affect the majority of wage earners who spend a large portion of their wages on this and is an issue that needs to be addressed by the Public Lands Transport Authority.
Business as Usual with the Development Partners
Prior to the Election the Ministry of Finance and Economic Management issued a Pre-Election Economic and Fiscal Update. With the soft re-opening of the borders on 1st July, the Domestic Economy is projected to grow at a rate of 3.2% in 2022, with a strong rebound of 5.3% in 2023. The main driver of growth is in the industry sector which is projected to grow at 12.7% and 13.6% in 2022 and 2023 respectively. Much of this growth has been supported by Overseas Development Partners with large infrastructure projects, such as the Vanuatu Infrastructure Reconstruction and Improvement Project (VIRIP), the Project Preparatory Financing, the Vanuatu Energy Access Project, Luganville’s Water Supply
Project, the Cooks and Tiroas Barracks Refurbishment, the Supreme Court Hall of Justice and the Vanuatu Climate Resilient Transport Project. Additionally, the Vanuatu Government will continue to finance projects such as the Norsup Airport, feeder road construction and maintenance throughout the country.
The return of tourist to the country and the commencement of Cruiseships in November will also provide additional stimulus to the services sector which is slowly returning to normality.
Despite the positivity with a return to growth, risks surrounding the outlook remain, including high inflation, Air Vanuatu disruption of flights, further COVID-19 outbreaks, and supply-chain disruptions to imports.
High liquidity levels in the banking sector have applied downward pressure on interest rates and this has assisted the banking sector to grow in 2021. Total banking profits profit in 2021 increased from VT111m in 2020 to over VT1b in 2021. Business confidence appears to be improving with growth in Private Sector Credit (PSC) which recorded a growth of 3.0 percent over the year to July 2022, from a negative growth of
1.9 percent over the year to July 2021. The improvement in PSC was driven by the upward trend in credit extended to both businesses and individuals and households in the first seven months of 2022.
Foreign currency reserves remain at a high level of 14 months import cover providing stability in the vatu currency.
On the Fiscal side, the Vanuatu government’s total net operating balance (including donor funds) was
a surplus VT 389.4 million at the end of July, which is equivalent to a 0.3% of GDP. Excluding donor financing, the Government’s net operating balance was also a deficit of VT1,665.2 million at the end of July which is equivalent to -1.4% of GDP. As a result of the lockdown of the country due to the COVID outbreak in March, there was a reduction in Government revenues. Total Government revenue collection in 2022 recorded VT16,190.4m, which is equivalent to 47.0 per cent of the revised budget target of VT34,464.2m and is 18.3% lower than the VT 19,825.1 million that was collected up to July last year. On the expenditure side , expenses so far in 2022 came to VT 17,855.6m representing 52.6% of the 2022 revised budget target of VT33,969.9m and 13.1% more than the VT 15,781.7m that was spent in the first seven months of last year.
Development partners continued to provide budget support for with the 11th EDF and funding for major
infrastructure project coming from the World Bank, JICA and other development agencies. Economic support also included VT 584.6m to fund the 3rd economic stimulus package.
With the new government, there will unlikely be much of a change in Policy Direction. The economy is projected to improve in 2023 despite concerns about the world economic outlook. The new government will have to face the major challenge of dealing with what to do with our National Airline, but overall, the course has been set by the previous government and is unlikely to deviate from the direction it is going.