THE STATE OF BUSINESS POST COVID-19
Businesses are closing, unemployment is rising, revenues for the Government are declining, the threat of COVID-19 is ever present, thousands of workers are leaving to go overseas for employment opportunities – these are just some of the issues which make up our current reality.
These topics have all been spoken about at great length, and this article will not go into detail about them. Instead, this article will attempt to take a deep breath, to take a step back and to look beyond COVID-19, and how we can work together for a brighter future.
Tourism or Agriculture? Why not both?
Much of the last year has been dominated by a false debate about what sector deserves investment and support – tourism or agriculture, leaving us with the impression that there can only be one winner. Instead, the answer is both simple and complex – both are absolutely critical to the economy and to the country and will continue to be so in the future.
To explain why we say this let’s look at tourism: the sector employs thousands of people. It provides income to hundreds of small business owners across the nation (93% of tourism businesses are locally owned). It brings in billions of vatu in foreign currency. It supports farmers across the country who provide produce to hotels. It provides billions of vatu every year in tax revenue to the Government. Anyone disputing tourism’s importance needs to understand what is happening to the economy without it – with boarders now closed, VAT returns were down 45% in December 2020 compared to the year before. Thousands of farmers and rural tourism operators have seen drastic falls in incomes. It is simply not true to say that COVID-19 has not impacted people outside of Efate, Santo, & Tanna – although these hubs have been most impacted. Unless tourism recovers properly, the entire nation will continue to feel the impacts of COVID-19 for many years.
Let’s now look at agriculture: this sector is without question vital to Vanuatu’s society and economy. It represents 20% of GDP, puts food on basically every table in the country, and has provided security to the nation throughout these crises. Agriculture is deep within the heart of Vanuatu. Improving the development opportunities in agriculture is one of the best ways to improve the wellbeing of the people of Vanuatu – a quick look at our rates of Non-Communicable Diseases (NCD’s) will confirm this. There is an economic and moral imperative that we all work together to grow this sector. This will not be an overnight success as plants and produce take time to grow, as do markets, both domestic and overseas. We need to stop the general belief it will bring immediate prosperity to all working within the sector.
So how do we move forward towards a brighter future for Vanuatu?
If we can agree on the simple fact that both tourism and agriculture are critical to Vanuatu, this is a good starting point. If people think that the economy has been too reliant on tourism, then we should be seeking to diversify and grow other sectors to support the economy, rather than turning our back on tourism and shrinking that sector. If the tourism sector fails to recover quickly, the country will be poorer for many years to come. The Department of Tourism’s existing Sustainable Tourism Policy includes some fantastic policy concepts. The idea of further spreading the benefits of the tourism dollar to more people around the country, whilst ensuring there is no harmful environmental footprint left behind, is a policy everyone should be supporting. Indeed, there are many stories of success where tourism businesses have been directly responsible for diversifying the rural economy. Why would we want to throw away all this progress?
With regards to agriculture, we must be realistic about what can be achieved: farms in Vanuatu are invariably small-scale and continue to face barriers to access to markets through complex geographical barriers that we need to be realistic about. Export opportunities are currently limited – for many products, Vanuatu is competing with large scale production from farms overseas, using technology Vanuatu has yet to embrace, and with easy access to market.
Instead of focusing on exports as the primary market for expansion it is suggested we should be seeking to grow demand from the domestic market where possible. For example, the substitution of imported rice with local kaikai, or growing the tourism sector – one of the key customers for this sector. A visit to the markets now shows vendors are struggling to sell their produce which has negatively. They will realistically never export their produce, so let’s help grow domestic demand.
This should be complemented by the export of niche yet high-quality products, which we need to be highly strategic about selecting. For example, the quality of the soil here means that Vanuatu peppercorns and vanilla sell at roughly four times the price of the world trading price, and yet production remains low. Kava is another good example of a niche yet high-quality product, and one which is currently our most successful export. The Government has helped farmers to grow their supply of quality kava, whilst the formal private sector has done much of the value-addition and has developed export markets overseas. If we are serious about exporting agricultural goods, then we need to properly identify which products are worth investing in, and clearly define the roles of the Government and private sector. Right now, we are all confused. We need to be able to start having honest conversations about what will work, what won’t, and whose role is whose so that we can all work together.
Vanuatu is a very youthful country – 50% of the country was 20 or under in the 2016 mini-census. The need to create more jobs for the next generation will be one of the greatest economic challenges of the next decade. There is no easy answer – this will require serious thinking and work on a number of complicated topics. For example, by improving the quality of education and training – including crucially in-work training – more ni-Vanuatu will be able to access well paid jobs here in Vanuatu; by reducing the cost of doing business – for example electricity – more businesses can grow and the prices of goods can drop; by improving the ease of doing business, businesses can become more efficient and markets more competitive; by properly preparing for climate change and going ‘green’, we can make Vanuatu a global leader; by empowering women we can unleash their economic potential and grow the nation; by improving financial literacy and access to finance we can keep new and existing businesses to grow and flourish. The list goes on.
An area we have already been engaging with the Government on in how to improve investment. One gap identified is how to attract the right sort of investment. For many years, Vanuatu has been popular to less desirable investors for many reasons under our immediate control. As we mature as a nation, Vanuatu can set different standards. It is time to rebrand ourselves. We should be using Vanuatu’s incredible natural beauty, its organic produce and way of life, and the friendliness of its people to attract more of the ‘right sort’ of investors. For us, the ‘right sort’ or investor is someone who will contribute to the development of the nation – people who care and contribute.
We need to get better at identifying who these good investors are and making the process as simple as possible for them. Currently, the investment process is too difficult, too unclear, and too unfriendly. As above, Vanuatu needs to focus on creating jobs over the next 10 years for its youthful population, and jobs are only created when businesses are thriving.
So, what is the VCCI’s role in all of this?
In the first instance, we must continue to prove that we are genuinely committed to the development of the nation. For far too long, the perception has been that the Chamber is a white man’s club, only focussed on protecting the interests of a narrow group of business owners in Port Vila. This is certainly not the case now, and to understand this you only need to read more about the extensive work which the team is doing, showcased on pages x to x.
At the heart of everything the VCCI is doing is building trust and credibility – between the Chamber and its members, between the Chamber and the Government, and between the Chamber and the people of Vanuatu. As we move forward the VCCI is committed to being more representative. In the past we have been at times restricted by our Act. This will shortly change we embark in 2021 on the redrafting of the Act that underlies our actions and controls our structure. For example, only one out of 16 councillors represents Agriculture. This does not reflect the nation, and it is not good enough. We will be making more and more changes so that we are better able to serve all of our members across the archipelago. To support future changes, vote for who you wish to see on the VCCI council at the Annual General Meeting on the 29th of April.
So, what happens now?
The short-term risks to this country are immense, and there is undoubtedly the possibility of the next six months having a hugely negative impact on the long-run development of the country. Unless something changes, businesses will continue to close, jobs will be lost, and service delivery will worsen. If, however, we can successfully navigate through these months, and we build trust and genuinely work together, then the future of Vanuatu can look a lot brighter. The time for solutions is now. And we look forward to playing our part in their development and implementation.