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VANUATU TURNS THE CORNER

The last week offers us great hope – let’s use this as a springboard for the future

Antoine Boudier, VCCI President

Vanuatu has taken two big steps forward in the past week in the ongoing attempts to mitigate and minimize the negative impacts of the COVID-19crisis, through the arrival of the vaccines and the announcement of a stimulus package. These two milestones are unambiguously positive, and should be celebrated.

Firstly, on the vaccines, the 24,000AstraZeneca doses will help protect and possibly save the lives of some oft he most vulnerable people in society. These vaccines are safe, and have been proven to work around the world, with frankly astonishing results being seen from countries with high levels of vaccinations. One particularly clear example is the United Kingdom – in January the UK was experiencing well over 1,000 deaths every day. 60 million vaccines later, and the daily death rate is just 5. By far and away the dominant factor in this success is the vaccines, and they are allowing the UK to rapidly regain a high degree of normality.

A similar story should be told for Vanuatu– vaccines are our best hope of moving on from this crisis, and so their arrival is a huge step. The 4,000 people who signed up for pre-registration prove that people want these vaccines, to protect themselves and their families and neighbors. It was also pleasing to heart he Prime Minister will take the first vaccine. This leadership will prove to people that the vaccines are safe, and support their rollout.

The second good bit of news was the announcement of a second stimulus package. This targeted package supports the most impacted businesses ,and will help to protect employment and businesses, whilst the Special Business Grant will really help the smallest businesses. By safeguarding the economy today, the Government is helping to support the development oft he future.

I would like to again congratulate the members of the Government, as well as the hard-working public servants, of the Ministries of Health, and Finance and Economic Management in particular, for their excellent work in achieving these two miles tones .

As positive as this news is for the country, of course it is not the end of the road. It is clear that Vanuatu will still be dealing with the impacts of COVID-19 for a long time to come. However, it is also clear that Vanuatu has a chance to have some of the best COVID-19 outcomes of any country in the world. COVID-19 is of course both a health and an economic crisis, and so the best outcomes, by definition, mean as few deaths caused by the disease as possible, and as small and as short an economic crisis as is possible. This is what we should all be aiming for.

To understand how Vanuatu can achieve such positive outcomes, it is first important to understand why Vanuatu is in such a unique position.

Firstly, on the heath side, Vanuatu of course faces a substantial advantage in our geographical isolation. It was no coincidence that six months into the pandemic, almost all of the countries which had zero COVID-19 cases were small and isolated Pacific countries. We were of course also helped by the rapid decision of our main partners – Australia and New Zealand – to close their own borders, which helped to stem the flow of people coming to the Pacific.

On top of this geographical advantage, the Government has then done a truly excellent job in ensuring the country remains COVID-19 free. They have put in place a high-quality quarantine system, which has allowed thousands of seasonal workers and other citizen sand residents to return. They have confidently dealt with the three active cases we had in quarantine, as well as the unexpected event of a dead body washing up with the virus. All the while, the number of countries which have zeroCOVID-19 are falling – looking around at our Melanesian friends, Papua New Guinea has been facing the horrors ofCOVID-19 for months, whilst Fiji is in the early stages of trying to contain its own outbreak. Further afield, more developed places which have had COVID-19 under control for most of the last year, such as Taiwan and Singapore, are now facing their own severe outbreaks. OurCOVID-19 status is something which is enjoyed by less than 0.01% of the world and is something which should be cherished and protected.

On the economic side, Vanuatu has again been blessed with strong advantages. Firstly, the village life which dominates the country has been relatively unimpacted by COVID-19. This is not to say that their lives have been unimpacted – cash flow is down on the islands, some families are struggling to pay school fees, and so on – but it is important to recognize that the fundamental makeup and resilience of Vanuatu has meant that it is more readily able to weather an economic crisis. As an illustration, in Australia, in 2019 over 50% of the population was employed in the formal economy, whereas in Vanuatu it was just 10%. The relatively small size of the formal sector means that the impact of such a severe economic shock to the formal sector has had a relatively limited impact on the wider society.

However, for much of the formal sector, the past year has of course been exceptionally difficult. The formal sector is critical to the country, providing the majority of the tax revenue and the foreign currency, and so the formal sector must be supported. Income has been substantially down for many businesses, confidence way down, and many business owners facing huge questions as to whether their businesses will survive, particularly given the lack of clear end-date of the crisis. These businesses are of course also highly resilient and are used to dealing with disasters, and the compassion, dedication, and resilience shown by these businesses has helped to keep thousands of people employed.

On top of this, the Government has an incredibly strong fiscal position, thanks to the Vanuatu Development Support Program and the Vanuatu Contribution Programs. This has meant that even as tax revenue has plummeted – it fell 20% in 2020 compared to 2019 – Government finances have remained very healthy, with overall Government income in fact increasing last year. This has allowed the Government to ramp up its spending – total expenditure was up 18% in 2020 vs. 2019, which has helped to continue to support the economy, whilst also allowing Vanuatu to remain in an extraordinarily strong position debt wise. In 2020-21 Fiji had a budget deficit of 20%, with debt standing at 83.4% of GDP. For Vanuatu, the story could not be more different, with the country running a surplus and debt standing at just 46.6% of GDP – a testament to the prudence and the planning of the Ministry of Finance and Economic Management. A combination of these two factors – the small size of the formal sector, and the strong fiscal position – has allowed the Government to roll-out a second stimulus package, a level of support which is unprecedented in the region.
This is all to put Vanuatu’s position into some global context, and to recognize our strengths. So, what happens next, and how can we make sure to build on this strong foundation? Firstly, we must protect our health through the best avenue possible, which is vaccines. It is highly likely COVID-19 will come to Vanuatu eventually, and the more people who are vaccinated when that happens, the more protected the people are. The sooner people are vaccinated, the better. I truly believe that the COVID-19 vaccination program is one of the most important projects in Vanuatu’s history, and so based on that, let’s accelerate the program and take vaccinations to the next level. This also of course means procuring as many vaccines as possible as quickly as possible, something which we will rely upon on our friends in the international community to help us with.
Secondly, on the economy, the second stimulus package will hopefully prove a huge help to the most struggling businesses. However, if the borders are unable to open in any meaningful manner for an extended period of time, we still will face the issue of potential widespread business closures, unless the Government continues to provide support to businesses. So, what can we do? Firstly, I will go back to vaccines – they are the best bet to allowing us to re-open our borders with some degree of confidence and normality, and another reason that they are so important. Secondly, we must continue with bilateral discussions with key partners, to ensure that as soon as it is safe to do so from a health perspective, we are ready to reopen our borders to some degree, to support the tourism sector which is the heartbeat of the formal economy. Finally, we must continue to seek new ways to stimulate and grow the economy, including for the majority of the country living in the rural areas. We need to give businesses the confidence that they can survive this crisis and thrive after it.
I said earlier that Vanuatu should be aiming to have some of the best COVID-19 outcomes in the world, and this is something I honestly believe should be everyone’s goal. The Government, the private sector, the church, the chiefs, donors, civil society, and the people should all be striving together to be able to proudly say to the rest of the world “we had the best COVID-19 outcomes in the world”. If this happens, then this will then provide the finest springboard for Vanuatu to achieve genuine development for the entire country over the next decade. Let’s chase this future.

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