Posts Tagged ‘Vanuatu Economy’

Vanuatu’s economy will not recover. It is in crisis mode.

faltering economyStrong words, I know but the reality is that Vanuatu is rapidly sinking into a financial abyss from which there is no palpable return in sight, UNLESS…..

There is a fundamental shift in a number of areas that affect the economy. They include:

  • The present mismanagement of the economy by the RBV (Reserve Bank of Vanuatu);
  • The Government’s political instability;
  • Corruption within the political, public service bureaucracy, police force and judiciary.

At first glance, this may appear to be an over-simplification of the problems that cause Vanuatu’s economy to be at the mercy of the rest of the world. Perhaps it is, however, please take a minute to consider the following…..

The GFC (Global Financial Crisis) commenced exactly seven years ago and it’s getting worse by the minute! Some pundits, especially those aligned with the banking sector, the politicians, the Central Banks and the “too-big-to-fail” corporations will have you believe that the GFC ended some time ago. What a load of clap-trap!

The Central Banks continue to print paper money as fast as they can crank up the presses with every new batch of paper that goes out to the market.

What is the natural offset to paper money….you know…the one that has been used by mankind for thousands of years? GOLD!

How many tonnes of gold does the RBV hold in its Reserves? NONE!

What are the two strongest currencies in the world today? The USD (United States Dollar) and China’s Remimbi/Yuan. The USD is presently considered to be the world’s Reserve Currency, a position held since the second world war when it took over from the British Pound Sterling after the introduction of the Bretton Woods System.

However, the Chinese Yuan is set to replace the USD as the official Reserve Currency and WHEN it happens, the value of the USD will depreciate markedly as will those currencies that are pegged to it. Here in Vanuatu, unless someone from the RBV can show otherwise, it appears that the Remimbi/Yuan plays no part in the RBV’s economic considerations. As with its attitude towards gold, the RBV’s overall economic policies appear to totally ignore the potential consequences of not including China’s currency in its “basket” of currencies in which it trades.

copra exports Export earnersTourism along with fishing, offshore financial service, growth export commodities such as copra and kava are essential to Vanuatu’s economic growth prospects. As it happens, the present “value” of the Vatu against other currencies is way too high. It is artificially inflated at unsustainable levels thereby having a disastrous effect upon export income.

UNLESS Vanuatu takes a leaf out of Fiji’s book of economics and devalues its currency, soon, then many more Vanuatu-based businesses will go under….bankrupted by the lack of willingness on the part of investors to place their funds in this country, by a continued fall in long-stay tourism (we can’t compete against countries such as Fiji, Bali and the S.E. Asian countries – Vietnam, Cambodia and Thailand). My personal view is that an immediate devaluation of 15-25% of the Vatu against the world’s MAJOR currencies (USD, Euro, GBP, Remimbi and yes – the AUD) should be effected as soon as possible.

Oh, I can hear the cries now of “but food prices will go up too much” and “we rely on our imports” and “we won’t be able to afford to travel”. Such viewpoints are short-sighted and ill-informed within the context of what will make for a healthier economy for Vanuatu. Perhaps the Vanuatu Government/RBV should place more emphasis and focus on developing the traditional economy as well as taking the other measures already mentioned here.

The new coinage issue. Unnecessary and a total waste of money, money that I’m sure could haver been better used elsewhere.

By the way, it’s time the RBV stepped into the real world of the 21st century IT-wise. It’s web site is abysmal, severely lacking in any form of reliable, topical data and information. Time to get up to speed with the rest of the world, guys!

UNLESS Vanuatu’s political leaders have a change of attitude to their appointments, their infernal internal squabbling will continue to adversely affect the country’s finances.

Political upheaval and instability has cost the country dearly over the past two decades and particularly over the past five years. Every time there is another Motion of No Confidence put into play, it costs the country – big time. Instead of running the country as they are supposed to, too many MP’s spend their time running around shoring up their defences and/or soliciting help in overthrowing the government of the day so that they can dip their own snouts in the trough.

The amount of money lost when portfolios change I imagine to be huge. In most cases, the incoming Minister scraps any new initiatives made by his predecessor, whether warranted or otherwise. Political appointees are dismissed requiring them to be paid out and the list of unnecessary wastage goes on…….

The biggest of them all – CORRUPTION!

Corruption - The Silent Serial Killer

A lot of press coverage over the past few days has been given to the alleged corruptive practices of the 15 MP’s presently on trial for Bribery and breaches of the Leadership Code.

Let’s be serious folks – CORRUPTION is Public Enemy Number One when it comes to Vanuatu’s floundering economic health. It’s practised everywhere – by politicians and their advisors and appointees, by senior bureaucrats in the public service, by police and by members of the judiciary. In turn, the evil of corruption creates a level of gross incompetence within these same sectors. Too many “jobs for the boys” (cronyism); too much nepotism; too much fraud, bribery and theft; too many self-serving power plays and so on.

UNLESS the government gets serious about eradicating the problem of corruption, Vanuatu will continue to muddle around in the economic back-waters of the world.

What the Government MUST DO, NOT SHOULD DO, is to implement its commitment to UNCAC (United Nations Convention Against Corruption), a commitment that has been sitting in the waiting room for the past four years. It must legislate for the creation of an independent, government-funded anti-corruption agency….NOW! No ifs, buts or maybes – it must do it NOW! This would prove to be a huge step in the process of eliminating corruption in Vanuatu.

QUESTION: I wonder how many MP’s would be prepared to sign a Statutory Declaration in support of the policy formation and legislation for such an agency, especially if the same Statutory Declaration meant they had to commit themselves to resigning from office should they fail to support such an initiative? None? A handful?

I just hope that the present bribery case will prove to be the catalyst for a change in attitude by the relevant leaders of this country. The time is right. Is the political willpower there. We shall see.