Vanuatu: Economy

Vanuatu's economy is primarily agricultural; 80% of the population is engaged in agricultural activities that range from subsistence farming to smallholder farming of coconuts and other cash crops. Copra is by far the most important cash crop (making up more than 35% of the country's exports), followed by timber, beef, and cocoa. Kava root extract exports also have become important. Coconut oil, copra, kava, and beef account for more than 75% of Vanuatu's total agricultural exports, and agriculture accounts for approximately 20% of GDP. Tourism is a key driver of the economy.

The government has maintained Vanuatu's preindependence status as a tax haven and international off-shore financial center. About 2,000 registered institutions offer a wide range of offshore banking, investment, legal, accounting, and insurance and trust-company services. Vanuatu also maintains an international shipping register in New York City. In 2002, following increasing international concern over money laundering, Vanuatu increased oversight and reporting requirements for its off-shore sector.

Vanuatu claims an exclusive economic zone of 735,893 square kilometers and possesses substantial marine resources. Currently, only a limited number of ni-Vanuatu are involved in fishing, while foreign fleets exploit this potential.

Vanuatu's economic growth of 3.4% in 2006 was broad-based and strongly driven by the services sector, especially tourism at 20% of GDP. Other sectors that contributed significantly were construction (15.7%), wholesale and retail sector (12.4%), and the real estate and business service sector (11.2%). The agricultural sector showed improved performance due to better domestic prices for copra. Other items including cocoa, beef, and kava supported the growth. In 2007 tourism again contributed 20% of GDP. Vanuatu continued to experience strong economic growth through 2008, averaging nearly 6%. There was an increase in agricultural output, which was supported by high international commodity prices in mid-2008. While the global financial crisis did not have a severe impact on Vanuatu’s economy, the crisis caused low commodity prices that led to a decline in the domestic production of most commodities. Higher international prices in 2010 for copra, coconut oil, and beef saw an improvement in the agricultural sector. Construction activity, agriculture, tourism, services, and real estate were the main sectors that drove economic growth in 2010.

The Recognized Seasonal Employer (RSE) program is an agreement that allows unskilled Vanuatu laborers, such as fruit pickers and farm workers, to work in New Zealand. Starting from June 2007, RSE is anticipated to bring over 20 million vatu into Vanuatu's economy.

Sources: