Tourism and economic diversification in Vanuatu

This item was first published by Tess Newton Cain & Matthew Dornan on June 16th, 2015 on Devpolicy

Vanuatu’s formal economy is dominated by the tourism industry. Tourism is estimated to contribute 65 percent of Vanuatu’s Gross Domestic Product, directly and indirectly, with the growth of tourism supported by Vanuatu’s second most important contributor to the formal sector, construction. Together, tourism and construction activity have driven economic growth in Vanuatu over the last decade. However, this growth has not benefitted ni-Vanuatu equally, with development centred in Vanuatu’s most populous island, Efate. Few tourists venture outside of Port Vila, and few infrastructure projects are focused on development of rural areas. Within Port Vila, the benefits of growth have also not been distributed equally, with much of the medium and larger business segments of the private sector in Vanuatu consisting of foreign-owned businesses.

It is unsurprising in this context that a ‘national conversation’ about the importance of economic growth that is more inclusive and sustainable should take place. This conversation had commenced prior to the passage of Cyclone Pam and now continues to be pursued with increased vigour given the storm’s impacts, and a perception that Vanuatu is at a ‘crossroads’ with the commencement of reconstruction. A key focus of the discussion has been on the development of sectors other than tourism, which is often framed in terms of economic diversification. Arguments in favour of diversification, such as those in this popular article that featured in The Conversation, point to Vanuatu’s ‘disproportionate dependence on tourism’, which is said to both make it vulnerable to economic shocks and to limit the extent to which growth is inclusive.

One of the problems with these conversations is that the terms ‘diversification’ and ‘self-sufficiency’ are not clearly defined, and as a result, are often used inappropriately. Diversification is the opposite of specialisation. It involves doing (or holding) more things, or in the context of this debate, expanding other economic sectors in Vanuatu at the expense of tourism. Does this make sense in Vanuatu?

Before proceeding, it is worth noting that there is a lot to be said for specialisation. Indeed, the specialisation of occupations forms the foundation of modern capitalism (as discussed in Adam Smith’s Wealth of Nations), which for all its faults, has resulted in higher living standards around the world. The proportion of the world’s population that lives in absolute poverty has never been lower.

At a national level, specialisation enables a country to focus its economic activity in areas where it performs well or has a ‘comparative advantage’ (drawing on Ricardo). This is especially important in a small country. Attempts to produce everything, or even most things, are not only impossible, but are harmful to the economy as a whole as they inevitably involve taking resources away from well-performing areas (such as tourism) in order to subsidise poorly performing areas.

This is not to say that countries should not explore economic opportunities or better ways of doing things. Doing so is key to increasing productivity, which in turn, provides the basis for sustainable increases in living standards. [Furthermore, despite the frequent (mis)use of the theory of comparative advantage to argue against any industry policy, comparative advantage is a static concept, meaning it looks only at current productivity levels and says little about how a country can increase productivity in the future.]

But there are benefits to focusing on activities in which a country does or could perform well. Conversely, there are costs associated with focusing on too many economic activities – i.e., diversifying – and costs associated with focusing on economic activities where a country does not perform well.It is important to bear such arguments in mind in this ‘national conversation’, given calls to explore development of manufacturing, industrial zones, deep-sea mining, and various activities in which it is clear Vanuatu cannot compete in international markets. Despite calls for Vanuatu to diversify, the country’s ‘natural’ comparative advantage in tourism is obvious, given its beautiful climate, scenery, enduring kastom, and proximity to major tourism markets.

There are two key arguments that have been used to support the case for diversification in Vanuatu, neither of which is without problems.

Proponents have argued for diversification on the grounds of risk reduction, pointing to the ‘acute vulnerability of tourism-dependent economies’ when making the case for diversification into other industries. The problem with this argument is that it assumes that diversification will reduce risk. But the alternatives in Vanuatu to which proponents of diversification point are also ‘high risk’ activities. Agricultural exports are subject to the whims of quarantine policy in Australia and New Zealand, which is influenced by small and highly organised domestic agricultural lobby groups. Agricultural production that is tied to the tourism industry will have no impact on the risks of a downturn in tourist arrivals (although it is worthwhile pursuing for other reasons). Diversification into agriculture also does nothing to address the risks associated with natural disasters: agriculture is as prone to cyclone-related damage as is the tourism industry. Other potential industries, such as the offshore financial centre, are also ‘high risk’, albeit in a different sense (just look at the extreme case of Nauru, whose offshore financial banks were used to launder money in the early 2000s, subsequently leading to international sanctions).

That is not to say that there are no opportunities for risk reduction. One clear economic opportunity that can reduce exposure to downturns in tourism (and is also resistant to natural disasters) is labour mobility. There is scope to build on Vanuatu’s positive experience [pdf] with labour mobility, including its success under the RSE scheme in New Zealand. Since the passage of Cyclone Pam, ni-Vanuatu people have demonstrated a sustained and increased willingness to take up opportunities to work overseas to generate funds for rebuilding and livelihood maintenance. However, the pursuit of labour mobility opportunities also requires appropriate support to ensure that it does not undermine the resilience of sending communities.

The second argument in favour of diversification is that other economic activities are needed to support inclusive growth and to benefit rural Vanuatu. This argument holds more weight. However, the assumptions here are that (a) tourism cannot be made more inclusive, and (b) other economic activities are more inclusive. Neither assumption is necessarily true. Just look at the non-inclusive growth driven by the resources sector in PNG (would deep sea mining in Vanuatu be any different?), or the more positive experience of Samoa, which demonstrates that tourism can result in inclusive growth.

In our view, advocating economic diversification in Vanuatu is a distraction from the more important goal of making economic growth more inclusive. This should certainly entail developing Vanuatu’s economic opportunities in select areas, such as through the pursuit of labour mobility opportunities, and the production of low yield, high value crops like coffee, honey, chocolate, vanilla and coconut oil. However, it should also involve making tourism more inclusive, through better links between tourism and agriculture (the supply of agricultural goods to resorts and hotels is an obvious starting point). There is great potential for the expansion of tourism to areas outside of Port Vila (through, for example improving domestic air transport links). It has long been a concern that the tourism sector is too Port Vila-centric (including in the oft-cited case of cruise ship [pdf] visits). There are signs that the importance of these approaches are increasingly recognised by government (e.g. through increased budgetary allocations to productive sectors such as agriculture) and development partners (e.g. through support for marketing of ni-Vanuatu properties and tourism products).

The fact is that tourism will remain central to Vanuatu’s economic future. It is Vanuatu’s most important source of foreign exchange, providing a means by which Vanuatu can pay for its imports, and thereby can achieve a level of self-sufficiency of which many other small Pacific island countries are no doubt envious. The government is right to explore new economic opportunities, as well as looking at ways to make the tourism industry more inclusive. An economic strategy aimed specifically at reducing Vanuatu’s reliance on tourism, however, is not the answer.


Vanuatu after Cyclone Pam: how will reconstruction be financed?


This item was first published by Matthew Dornan & Tess Newton Cain on Devpolicy on May 7th, 2015.

Vanuatu is currently faced with the daunting task of reconstruction in the wake of one of the strongest cyclones to ever hit the country. An earlier post noted that reconstruction will be expensive, and argued that the most important question for the Vanuatu Government in the coming years will be how to finance that reconstruction. That challenge will be the focus of this blog post.

Estimates of the damage caused by Cyclone Pam are still being undertaken. In the meantime, we can look at other disasters in the region for guidance. In the case of Cyclone Evan in 2012, the damage in Samoa was estimated at 30 percent of GDP. This is likely to be an underestimate in the case of Cyclone Pam, which impacted most provinces in Vanuatu. Nevertheless, if we use 30 percent of GDP as a guide, a similar impact in Vanuatu would equate to damage of $248 million USD, or 26,601.7 million vatu (an amount equivalent to 140 percent of annual government revenue).

Much of this damage bill will of course be absorbed by households and businesses – only some of which are likely to have had insurance cover. But the Vanuatu government will also fund considerable reconstruction, given the damage to public infrastructure such as schools, health clinics, and government administration buildings. It is also assisting households affected by the disaster. The government has already funded much of the emergency response and initial recovery effort; in its appeal for emergency relief, the government sought $29.4 million USD, and received about half that amount. In its subsequent Humanitarian Action Plan, which will cover three months to the end of July, the government has requested $13.5 million USD.

Revenue raising options are limited. The government is unlikely to increase taxes just when ni-Vanuatu are reconstructing their homes and livelihoods (in fact, it has lowered import duties on certain goods, such as farming tools, seeds and building materials). The same consideration will also restrict its ability to widen the tax base. The establishment of income taxation is a worthy long-term endeavour, but not something that should be pursued in the aftermath of Cyclone Pam. The imposition of a disaster levy, as occurred in response to the Queensland floods in Australia in 2010–11, would adversely affect households hit by the cyclone. (In the case of the Queensland flood levy, the Commonwealth Government was able to transfer resources collected by the tax from non-affected parts of the country to flooded areas – an exercise that is less feasible in Vanuatu given that most of the country was struck by the disaster.)
External funding will therefore be required.

A surge in aid provided in response to Cyclone Pam will cover some reconstruction costs. Australia has announced $15 million AUD in assistance (less than $5 million of which, it appears, will take the form of budgetary assistance), the ADB is giving $5 million USD, and the World Bank a similar figure. The Pacific Disaster Risk Financing and Insurance scheme has also provided $1.9 million USD. This funding has been welcomed by the Vanuatu Government. However, it is grossly inadequate for the task of reconstruction. This is hardly a surprise. As noted previously, experience around the world tells us that increases in development assistance never fully fund reconstruction. Past disasters in Vanuatu (three cyclones in 1985) and Samoa (Cyclone Evan in 2012) have resulted in aid surges of approximately 5 percent of GDP – far below the cost of damage caused by these events.

The Vanuatu Government will need to borrow funds for reconstruction, as did the Samoan Government after Cyclone Evan. It makes sense to do so. Access to finance for reconstruction is an essential element of recovery, and one that influences the severity [pdf] of the economic impacts of a disaster. Cyclone Pam was not like other cyclones that regularly hit Vanuatu. It was a unique event, which one hopes, will not be repeated for some time.

Vanuatu is currently in a sound fiscal position, with public debt of only 21 percent of GDP, well below the 40 percent threshold recommended by the IMF. On the face of it, the Vanuatu Government is therefore in a position to borrow money for reconstruction. However, look more closely and the government’s position is less rosy. It currently has a significant pipeline of infrastructure investments forecast. These projects are to be funded through a combination of grants and concessional loans from donors, and would result in a considerable increase in public debt – forecast to rise to just below the 40 percent threshold identified by the IMF (and this is optimistic, given that it does not account for the economic impacts of Cyclone Pam).

The government will need to reconsider whether infrastructure projects that had been planned prior to Cyclone Pam should proceed. There are strong fiscal grounds for cancelling or postponing, where feasible, given the financial and logistical demands that reconstruction will place on both government and the private sector in Vanuatu. If all of the projects that were planned prior to Cyclone Pam were to proceed, it is difficult to see how the government could fund them in addition to reconstruction without placing itself in a precarious financial situation. The government will be conscious that the more it borrows, the more vulnerable it is to future disasters, whether of an economic or natural variety. The inflow of funds also risks placing upward pressure on the vatu, and the construction activity associated with such projects would exacerbate inflationary pressure caused by reconstruction activity (Samoa experienced this in the wake of Cyclone Evan).

The government must therefore balance the need to finance reconstruction with the long term risks associated with that debt.

However, cancelling projects will also involve costs, and will not always be feasible. Some projects are well-advanced. Construction work has already been tendered, and construction companies have invested in plants and machinery. There is concern in Vanuatu’s private sector that these projects will not proceed, leaving businesses out of pocket. The decision about whether or not to proceed will therefore need to be made cautiously, with a view to the impact on the government budget, private sector, and the economy over the long run.

Where possible, projects should be modified to incorporate reconstruction work. There are some projects where this is clearly possible. The Vanuatu Tourism Infrastructure Project, for example, which includes beautification of the Kalsakau Drive (Port Vila seafront), has been fast-tracked by donors in response to government requests. Rehabilitation will include reconstruction work. This ensures that the project meets the needs of Vanuatu, while also honouring contracts.

The debt implications of projects should also be considered. Many of the infrastructure projects in the planning pipeline involve both concessional loan and grant elements, which makes them attractive even if there is no potential to incorporate reconstruction activities. The Port Vila Urban Development Project is a case in point. The project is estimated to cost $39 million USD, but most of this is being provided as a grant by DFAT – borrowing for the project will involve only $5 million. Debt associated with this particular project is therefore minimal.

Projects that are good candidates for cancellation or postponement are a) those that require the government to borrow considerable funds on less concessional terms, and b) those that are less advanced, or where financiers are willing to amend contracts. One project that fits the first characteristic is the road upgrade in South Tanna and Malekula, which is being funded by China Eximbank. The conditions associated with this loan are not very concessional – interest of 2 percent will be charged over 20 years, with a five year grace period. The loan is also reported to be very large, at $50 million USD (for purposes of comparison, the Lapetasi wharf development is being funded by a Japanese loan of approximately $40 million USD, which will incur an annual interest payment of 0.56 percent and be repaid over 40 years, with a ten year grace period). Outright cancellation is unlikely, given that ground was broken for the project last week, but modification or downsizing could be possible – the second phase of the project, focused on Malekula (which was not so badly affected as other parts of the country), has not yet begun.

The economic impact of a project is also important, of course. Projects that generate economic activity, and thereby increase revenue that the government can use to repay debt, are attractive. However, it is worth stressing that when considering economic impact, a conservative and risk-averse approach is appropriate, given Vanuatu’s exposure to natural disasters and economic (and policy) developments in neighbouring countries.

The Vanuatu Government clearly has some difficult decisions to make as it seeks to ensure that sufficient funding is available for reconstruction. Although public debt is currently low, the government has entered into agreements with development partners and contractors for a range of infrastructure projects. These should be amended to include reconstruction where possible. In some cases, where projects are less advanced and grant finance is minimal, it will make sense to postpone projects (possibly indefinitely). Cancelling or postponing any project will be a painful and contentious exercise. Not doing so will also be painful – in the long-term – as it will limit the government’s ability to borrow funds for reconstruction.


How Vanuatu’s culture can contribute to a diversified economy after Cyclone Pam

In a recent item, Joseph Cheer discussed the importance of economic diversification as part of Vanuatu’s long term recovery and future development. He argues (among other things) that Vanuatu’s economy has become too dependent on tourism, that the growth associated with this sector is not as inclusive as it could be and that what we offer tourists is not sufficiently differentiated from other Pacific island destinations to make longer term growth sustainable.

I agree that there is a need for increased economic diversification and Matthew Dornan and I will be looking at this in more detail in the next little while.

But there is one point that I will address here. And my thinking on this has been further informed by a recent article [pdf] by David Throsby in the Asia and the Pacific Policy Studies journal. In this article, Throsby argues that there are opportunities for Pacific island countries to draw on their rich cultural heritage for economic benefits as well as for social ones.

This is an area of policy development that has not been given a great deal of attention historically either by governments or by development partners. But as we seek to ‘build back better’ in Vanuatu, maybe the time has come to look at this issue more closely to identify the opportunities and challenges it presents. This conversation is one that has been underway at some time at the regional level, especially under the auspices of the Human Development Program of the SPC.

discussed some of the aspects of developing cultural economics last year with Dr Elise Huffer who is SPC’s Culture Adviser. Among other things, we talked about why this area of economic development did not seem to receive much attention at the level of government policy. Dr Huffer identified two aspects of what was needed to rectify the national policy deficit. First, there is the need for the ‘cultural sector’ to be more present in discussions that inform and frame national policy, whether through civil society groupings or through the formulation of national cultural policies by governments. Secondly:

is work that’s … having impact at the international level which is also about re-thinking GDP measures, rethinking well-being. And we know that culture in the Pacific is very important in resilience of communities and in people’s daily well-being. But that’s not something that’s measured. It’s not counted. So it tends to sort of drop off the radar when you’re talking about policy, when you’re talking about national budgets, when you’re talking about projects or programs being carried out in countries.

All 3 of these experts agree that for countries such as Vanuatu that have established tourism industries, there are opportunities to develop linkages between the ‘cultural producers’ and what is essentially a domestic export market. There are, it is true, significant risks that need to be identified and managed, including in relation to protection of intellectual property and maintaining cultural integrity.

But, drawing on cultural heritage and its expression whether through traditional means (dances, handicrafts, custom ceremonies) or more modern ones (Fest Napuan) is self-evidently a way of differentiating Vanuatu as a tourist destination.
Here in Vanuatu, we already have a number of ‘dots’ that lend themselves to being further developed and joined up to inform this aspect of economic policy in the future. They include the work that has already been done on the National Sustainable Development Plan during 2014, in which culture features as a pillar of sustainable development, the Tourism Ambassadors program which focuses on promoting locally produced handicrafts for purchase by visitors and the work of ACTIV which creates a supply chain for rural handicraft producers to sell their products to tourists who may not venture beyond Port Vila.

In his article, David Throsby identifies that no Pacific island country is a signatory to the 2005 UN Convention on Cultural Diversity. This, he argues, is a drawback:

Not only does this exclude them from the ongoing discussion on cultural policy development that parties to the Convention participate in, it also means that they cannot access assistance from the International Fund for Cultural Diversity that the Convention has established. In short there is a danger that Pacific island countries may not be able to realise their full potential for linking their cultural and economic development in the future if they are not adequately connection into ongoing policy developments in the international arena (p8).

Taking the step of ratifying the Convention and securing access to funding to assist in developing this aspect of the economy may be a part of how Vanuatu can ‘build back better’ after Cyclone Pam.


Building back better: state business relations in Vanuatu after Cyclone Pam

Yesterday evening the Vanuatu Chamber of Commerce and Industry (VCCI) convened a meeting, open to its entire membership. The purpose was for the Chamber’s council to hear from members about how their businesses had been affected by Cyclone Pam and what business owners felt was required, whether from government or donor partners, in order for them to rebuild.

Some of the issues that were discussed will be mentioned in future items that I am working on with Matthew Dornan of the Development Policy Centre.

Here, I want to put forward that an event like Cyclone Pam serves to highlight issues that were pre-existing before March 13th and possibly create opportunities for new ways forward, not only in the immediate response period but further into the future.

State-business relationships (SBR) are not well-established in Vanuatu, as is the case elsewhere in the Pacific island region. In terms of state building, the relationships between government and the business community do not necessarily receive a lot of attention but they are a crucial part of building and maintaining a state that is transparent, responsive and able to maximise opportunities to deliver services and promote development of the whole population.

Rather than examine the reasons for why this relationship is under-developed, I will focus on why it is important that it be enhanced and developed further and how the impact of Cyclone Pam creates opportunities for ‘building back better’ in this regard as in others.

Why are SBR important? Members of the business community are often affected directly by changes in government policy and their employees may also be affected indirectly. This means that the business community is an important constituency for government to proactively engage with when contemplating introducing new initiatives or modifying existing ones.

In countries with limited resources, private sector operators may be well placed to assist government with service delivery activities whether by way of co-financing or providing in-kind contributions such as logistical support. A bedrock of strong SBR provides the basis for these types of partnerships to evolve and flourish.

The private sector in Vanuatu is growing with more and more ni-Vanuatu people entering into businesses in many sectors. They have clear objectives that they want to achieve and strong opinions about what they think government can and should do to support them in achieving their goals. Mechanisms and processes that help to develop and strengthen SBR allow for private sector interests to be aggregated and formulated in ways that are of benefit to policy makers. They also provide opportunities for government to keep this key constituency informed about what is or is not happening and allow for expectation management on both sides.

Opportunities to ‘build back better’
We have already seen, and it was reported at last night’s meeting, that members of the private sector have joined with government agencies to work firstly within the humanitarian response phase and, more recently, to support the conduct of the Post Disaster Needs Assessment [pdf]. This joint activity should contribute to improving understanding on both sides and removing mistrust that may exist and lead to relationships that are more collaborative in nature for the future.

Vanuatu is a small country with limited resources and there are opportunities for policy makers in government to access expertise from within the business community to support their work. There are many retired public servants who are now working in the private sector who are well placed to assist with the development of policy in key areas such as fisheries, agriculture, infrastructure and more. The private sector is home to people who have expertise and experience in many areas often bringing with them examples of initiatives and projects that have been used in other countries. This is knowledge and expertise that government should be able to harness to inform policy development and implementation.

There are a number of aspects to how to support the development of better SBR in Vanuatu. The VCCI is a key component in this and has been working to establish more and better relationships with government, including by participating in the consultations on a National Sustainable Development Plan during 2014. But there is more to be done, especially in extending the reach of the organisation beyond Port Vila and Luganville and ensuring that the Chamber’s agenda is not (or is not perceived to be) dominated by the interests of one particular sector or individual business entity/owner. The VCCI requires extra resources in order to deliver on its mandate and play its part in promoting pro-development SBR in the future.

Both government and business need to be able to engage in a ‘safe but challenging’ space where differences of approach are acknowledged and accommodated within a wider purpose of working together to recover and rebuild. Policy makers need to be able to reassure business owners that commercially sensitive information will remain confidential. They can invite the Chamber and/or individual members of the private sector to contribute to the policy-making process in ways that are respectful and mindful of the constraints that business owners operate under when extending those invitations. The business community (via the Chamber and other peak organisations) needs to frame its approaches to policy makers in ways that promote dialogue and mutual endeavour. They need to be cognisant of the constraints under which policy makers operate and seek ways to inform government about what they can offer as well as what they want.

On both sides there are opportunities to grow pro-development relationships that are based on mutual respect and conducted assertively.


Is the Pacific Catastrophic Risk insurance scheme an example of successful pooled service delivery?

This item was first published on Devpolicy on April 8th, 2015

In a recent assessment of the success or otherwise of pooled service delivery initiatives in the Pacific island region, Matthew Dornan and I did not consider the World Bank-led Pacific Catastrophe Risk Insurance pilot as we felt it was too recently established to provide sufficient information for us to evaluate. Being a pilot it has not had a great deal of exposure. However, it has generated some recent discussion (unfortunately this item credits the Asian Development Bank with having established the scheme) further to its recent payout of US$1.9 million to the government of Vanuatu in the aftermath of Cyclone Pam. This is the second time the scheme has made a payment to one of the pilot member countries, the first being US$1.27 million paid to Tonga further to the passage of Cyclone Ian during January 2014.

Less positive was the experience of Solomon Islands, who withdrew from the scheme after experiencing two events (the Santa Cruz earthquake and flooding in March 2014), neither of which triggered a payment from the scheme despite the fact that they had very severe impacts on the country socially and economically. This has, it would appear, led to the consideration of increasing the range of responses available to better suit members’ needs. Which is what pilot projects are for – to learn.

In 2014, the Forum Economic Ministers’ Meeting (FEMM) received a paper [pdf] that documented the experiences of the member countries that had participated in the scheme up to that point and captured the lessons learned from the pilot project. It highlights the need to develop a wider range of responses with particular reference to the experience of Solomon Islands highlighted above. Further to consideration of this information, the FEMM decided that the scheme should continue and requested that the World Bank examine ways in which this could be effected, including options for future financing. To this end a workshop was convened in Suva in March of this year.

The $1.9 million payout to Vanuatu will, it is true, barely scratch the surface in terms of what is required to finance relief, recovery and rebuilding in Vanuatu further to the impacts of Cyclone Pam. This insurance scheme is not intended to meet all costs, rather it is designed to be able to respond quickly to assist governments with immediate/short-term costs associated with the disruption of critical service delivery. Given the enormous impact of Cyclone Pam it will go only a small way to doing that. But it constitutes one of only a handful of direct cash injections into government coffers since the cyclone (the others being release of funds by the Reserve Bank and cash donations from Papua New Guinea and Solomon Islands). In addition, the promptness of response will add to its credibility not only in Vanuatu but elsewhere in the region and we can expect that this mechanism will form part of longer-term discussions about disaster preparedness.

More generally, how does this example of pooling stack up in terms of success or otherwise? Here are some snapshot answers to the questions we used in 2013 as the basis of our assessment of 20 pooling initiatives:

Was the pooling initiative ever implemented? – as a pilot, yes and we are still waiting to see if and how it will be expanded.

Has the pooling initiative been sustained over a period of time or did it cease? – to be confirmed.

Has it remedied a service provision deficit at national or sub-national level? – yes, it has provided access to a service that was previously unavailable to Pacific island governments and has utilised bulk purchasing power to achieve costs savings of approximately 50% to each country.

Has it delivered a service or good other than capacity building? – yes.

It is true that there has been a significant amount of donor support for this initiative with the World Bank providing technical support and the government of Japan playing a large part in subsidising the costs of members’ premiums (other than for Cook Islands who paid for their premium for this season). But each of the members of the pilot has made a nominal contribution (US$20,000) in each of the seasons that has been covered reflecting a degree of high-level political support that we struggled to find in relation to some of the other activities we examined.


The dangers of an information deficit when responding to Cyclone Pam

This item from Radio Australia looks at some of the lessons learned in the immediate aftermath of Cyclone Pam. One that is not discussed is the importance of communication and information sharing. There has been a lot of confusion and insecurity in the wider community as a result of the NDMO/VHT not providing a regular supply of authoritative, credible information about what they are or are not doing. In the very early stages an activity of this type was hampered by lack of access to communications including radio, social media and text messaging. However, as we know, those services were restored in parts of Port Vila relatively quickly and are continuing to come back on stream elsewhere in the country with each passing day.

The government and partner agencies have of course been very busy doing humanitarian relief and this does not leave a lot of time for telling people what you are doing. But there are significant risks associated with leaving an information vacuum. Nature abhors a vacuum and if people are left to fill an information vacuum then they are almost certain to fill it with a bad news story not a good news story. We have seen that happen in the days since the response to Cyclone Pam commenced. Based on what I have talked about with many people plus what is being circulated in traditional and social media, the following things seem to have happened because people simply did not have access to the right or enough information:

  1. People in different parts of the country have no idea how this storm affected other parts of the country and so find it difficult to accept that some areas are more in need of assistance than others.
  2. Particularly in urban and peri-urban areas, people are confused about whether they have been included in the assessments undertaken to determine relief needs, whether they are entitled to food aid or other kinds of relief and how to access relief that they are entitled to.
  3. Rumours have been able to start and spread which might lead you to believe one or more of the following: no aid has been distributed anywhere and is being stockpiled at NDMO where it is raided by NDMO employees; all of the aid has gone to Tanna because that is where the prime minister and the chairman of the National Disaster Committee are from; no aid has gone to Tanna; the aid agencies know what to do but the government won’t let them; the government knows what to do but the aid agencies won’t tow the line. There is no single source of quality information that people can be directed to that can act as a counter to this rumour mill.

The importance of maintaining good information flows goes way beyond simply getting the PR right. It is important from the point of view of transparency and it is a key aspect of maintaining social cohesion in times of stress. It is also important in order to counter a very unhelpful narrative that ‘the government isn’t doing anything’ which in the long term can undermine a population’s (already somewhat tenuous) confidence in the state to provide for them at all. It is also necessary to assist with managing expectations. If people know that their community is expected to receive relief supplies in 5 days time, they can plan for that. Admittedly they may not be happy about the wait but if they receive no information then they are more likely to feel forgotten about or abandoned, either of which would be worse.

Working with the media is one way of keeping people informed about what humanitarian responders are or are not doing. On the other side of things, a mechanism for collecting, collating and distributing inward flows of information would likely assist NDMO/VHT in doing their work even better. There does not appear to be any means for people to deposit information they have gleaned from family and other networks with NDMO/VHT (other than being able to talk your way in to speak to someone who is already so busy that they have difficulty understanding what you are saying). This type of mechanism can help add to responders’ knowledge about what is happening on the ground, including in some very remote areas where every bit of local knowledge would assist in ensuring that relief efforts are appropriate, effective and well managed. Given that a lot of the people assisting government with this response effort are new to Vanuatu, their task would surely be made easier if they had access to updated credible information that was being collected and collated from as many useful sources as possible.

There have certainly been some instances of NDMO using opportunities to communicate with stakeholders and the wider community and I am particularly pleased to see that they recently convened a meeting with all of the country’s politicians. These people are now able to perform a great service to the country by using their networks to give people some concrete facts about what the government is and is not doing in response to Cyclone Pam.

But in terms of ‘lessons learned’ I recommend that NDMO/VHT invest in developing an appropriate communications strategy that will support and strengthen this work in the future.


Australia’s opportunities to put words into actions to support Vanuatu after Cyclone Pam

Further to the recent calls by some within Australia to expand the number of horticulture/agriculture places available in the Seasonal Workers’ Program, there is also a need to look at how the hospitality component of this program can be utilised to provide a safety net for those who face losing their jobs or becoming under-employed within the tourism industry.

The impacts of Cyclone Pam will affect the hospitality industry significantly, particularly in SHEFA province (centred on Port Vila) and TAFEA province (predominantly Tanna, where one experienced operator has predicted an 80% contraction during 2015). Although the industry is working to promote the destination, including by encouraging visitors to rebook for Santo and Malekula, which have been largely unaffected by the storm, there have already been cancellations and more can be expected. This exacerbates a pre-existing lack of confidence within the sector reflecting forward bookings that were significantly lower than have been experienced in recent years.

Information from within the industry is still coming to hand. However, a number of the larger properties are yet to confirm when they will reopen. These are the properties that provide the bulk of employment within the sector.

The problem

The tourism industry constitutes the most significant part of the formal economy in relation to jobs. A survey of tourism businesses conducted in 2007/08 established that there were 3,300 full-time equivalent jobs and 1,400 part-time jobs in the industry and we should expect that number to have grown given the expansion in the industry since then. If staff are laid off or moved to part-time work there is no absorption capacity elsewhere in the industry and unlikely to be any for some time. Given the geographical extent of the impact of Cyclone Pam there is limited opportunity for people who are laid off in Port Vila to return to their home islands given what we know about food security issues, lack of income-earning opportunities and the need to rebuild homes in outlying and rural areas.

There are risks associated with social cohesion and urban resilience associated with even medium scale job losses plus if people lose access to income earning opportunities they are less able to support immediate and extended family networks, many of which have additional and possibly urgent needs at this time.

How can Australia help?

There are 2 ways in which the government of Australia can respond to this issue to support Vanuatu in the short to medium term:

1.         Expansion of the Seasonal Worker Program’s hospitality componentThe Seasonal Worker Program (SWP) can be expanded by a set number of positions that are reserved specifically for workers from Vanuatu. The SWP already has a hospitality component and given the background to this (see above) it is appropriate that the quota be increased in this sector. This proposal should be seen as additional to the proposal to expand the number of places in horticulture and agriculture.

This will require a ‘Whole of Government’ response with particular focus on addressing the demand side constraints as identified in recent research undertaken by the World Bank and the Development Policy Centre. In addition, steps should be taken to ensure that any additional transaction costs arising are not borne by the Government of Vanuatu or Vanuatu-based agencies and businesses that need to be part of the process. As we know, the government of New Zealand has responded to the impact of Cyclone Pam on Vanuatu by waiving visa fees for ni-Vanuatu workers travelling there as part of the Recognised Seasonal Employment (RSE) program. This is an example that Australia could look to follow.

This approach would fit very well with the commitment expressed by Foreign Minister Bishop to address and remove these bottlenecks as a matter of priority for further developing the SWP.

We have seen that there is appetite for people to take up opportunities such as this with reference to a number of groups having departed since the passage of Cyclone Pam to participate in both the SWP and its counterpart in New Zealand. However, the fact that the SWP already includes a hospitality component makes it particularly suitable to provide an additional solution of this type that specifically addresses the impacts on those employed in the tourism industry.

2. Influence Carnival to increase the quota of jobs made available to ni-Vanuatu workers on their cruise ships and work with Carnival to ensure that the revised quota is filled.

Foreign Minister Bishop has made many references to the development partnership between her government and Carnival Cruises as a flagship for her new aid paradigm that prioritises the role of the private sector in promoting economic growth in the Pacific island region. She cited this agreement with great approval during her joint press conference with the Hon Joe Natuman, Prime Minister of Vanuatu in Port Vila on Sunday 22nd March.

In exchange for a reduction in tying-up fees at the wharf in Port Vila, Carnival undertook to employ ni-Vanuatu people on ships that operate in the Pacific island region. In 2014, there were 120 people employed under this arrangement. The Government of Australia can utilise its very positive relationship with Carnival via the development agreement to have this quota increased and ensure that demand-side constraints and additional transaction costs are met without placing any extra burden on the Government of Vanuatu and Vanuatu-based agencies and businesses that need to be part of this process.

Why is this good for Vanuatu?

  • It provides a safety net for those whose employment status is likely to be affected by closures or scale-down (whether temporary or otherwise) in the tourism sector.
  • It provides opportunities for ni-Vanuatu people to earn money to support recovery and rebuilding efforts within their families and communities, thus preserving resilience and self-reliance.
  • It allows those with hospitality/tourism experience to preserve and enhance industry-related skills in anticipation of returning to the industry within Vanuatu when tourism begins to recover.

Why is this good for Australia?

  • It allows the government of Australia to be a ‘first responder’ in terms of short/medium term inputs to build on the immediate humanitarian response effort already provided.
  • It allows the government of Australia to demonstrate that its pre-existing investments can be made to respond innovatively and nimbly to address development needs without having to invent something new.
  • It fits with the government of Australia’s aid paradigm with its focus on promoting economic growth and working with private sector partners.

It is important to be aware of the longer term risks associated with increasing places in seasonal migration schemes. In a forthcoming paper, Luke Craven has pointed to the danger of communities becoming dependent on access to such schemes, even though they are by their nature demand-led and therefore may be an insecure revenue stream in the long term. Whilst out-migration can bring economic benefits, there is a need to address associated risks of increased vulnerability within sending communities in order for schemes of this type to achieve their full development potential.

My recommendation for the proposals I have put forward here to meet adverse employment impacts in the tourism industry is that they be time-bound in nature. It is anticipated that the fact that they are focused on tourism-focused jobs means that there will be an in-built time-bound aspect as people can be expected to return to jobs at home once they become available.


Food security responses in Vanuatu should include urban gardens

The response to Cyclone Pam led by the National Disaster Management Office (NDMO) includes a commitment to preserving the resilience of the people of Vanuatu. In the immediate aftermath, the prime minister encouraged the population to eat root crops (that can last up to 3 weeks) and fruit that had fallen from trees until such time as food aid could be distributed. The assessments done by government with the support of UN agencies and others have informed a response plan of provision of food aid for 3 months with each batch of food being accompanied by seeds, seedlings and hand tools to allow for gardens to be re-established. The fastest growing crops will be available to harvest from then and the provision of food aid by the government will (it is planned) be discontinued.

The NDMO has advised that at this stage there is no provision of seeds, seedlings or gardening tools to residents of Port Vila and the surrounding peri-urban areas. The rationale behind this is that these items are available from commercial suppliers and that prices are reduced following an exemption from duty and Value Added Tax (VAT) on products of this type imported after March 14th (for a period of one month).

This makes perfect sense as part of an initial response with the need to address food security in areas of the country where garden produce is essentially the only form of nutrition and there are no shops at which to buy seeds or tools.

However, as we look to responses that are medium and longer term in nature, we need to ensure that food security and longer term nutrition of our urban and peri-urban populations is appropriately supported.

Prior to Cyclone Pam’s arrival many people living in and around Port Vila had established gardens to provide food for themselves and their families. Some of these were on blocks of land that they bought specifically for this purpose and others were more informal in nature, including using other people’s land without permission. These gardens have been severely damaged or destroyed. Other people who did not have this option and who are in formal employment received food crops from family members in rural areas in exchange for shop-bought goods (e.g. kerosene, cooking oil, sugar, salt) or assistance with school fees or health costs. This system is a product of the extended family network with the mutually supportive relationships of exchange and obligation that it entails. However, this system is now severely compromised because so much of the country has been affected. For example, urban families that were depending on food supplies to come from family members on Tanna are now without that supply and may not have the family connections in relatively unaffected areas (e.g. Santo and Malekula) to enable them to establish a new one.

The development of urban gardens can provide a safety net for vulnerable urban and peri-urban populations that will have numerous benefits in the medium to longer term. Here, I will focus on the economic benefits and the contribution that this will make to longer-term health benefits of urban and peri-urban populations.

Urban gardens should form part of an overall food security and economic resilience response package.

Economic benefits

The direct economic benefits arise in protecting urban populations from the adverse impacts of added financial burdens that come at a time where many may be at risk of losing their jobs or becoming under-employed. It is true that those living in and around Port Vila may have more employment opportunities than those living in rural areas, including opportunities to pick up casual employment as part of clean-up efforts in the short term and rebuilding activities in the longer term. However, they are also taking on additional financial burdens, including rebuilding or repairing their homes, sending supplies to family members elsewhere and providing for friends and family members they have taken in further to destruction of houses. These additional calls on resources come on top of those that were already present. The success of sales of ‘garden only’ blocks prior to Cyclone Pam (located at Teouma, to the east of Port Vila) was largely driven by those with relatively well-paying jobs seeking to minimise the costs associated with providing for large households, largely comprising people who do not earn an income.

The indirect benefits of establishing urban gardens include (in the longer term) an ability to sell surplus produce. Not only will this bring the overall costs of food down in and around Port Vila but it will also  allow for increased consumption that will support other aspects of the economy.

Health and nutrition benefits

There are already concerns about the relatively poor nutrition of urban populations arising out of a greater reliance on imported, processed foods such as white rice and tinned fish, which often has a high oil content. Prior to Cyclone Pam, people participating in the formal economy often did not have time to cook traditional dishes such as laplap and simboro but were able to purchase this type of food from the central markets (currently closed) or at food stalls located at kava bars. These food stalls are now largely empty. The implementation of an Urban Gardens project will help mitigate the risk of the quality of our urban population’s diet being further undermined.

How might an Urban Gardens project work?

The following points can form the basis of a project of this type:

  • Allocate parcels of public land within the urban and peri-urban areas (e.g. parts of sports fields) for use as community gardens under the management of local authority mechanisms.
  • Encourage private sector organisations to identify areas on their premises that can be used as gardens by their employees with the management of the garden to be handled by the staff in conjunction with the business to address issues such as out of hours access, security, etc.
  • Establish a mechanism whereby urban garden groups (whether community based or centred around private sector employment) can access support especially by providing seeds and seedlings.

Resilience and state building – challenges and opportunities in Vanuatu

This item was first published on March 29th, 2015

We have heard a lot about resilience in Vanuatu since the passage of Cyclone Pam, during the 13th and 14th March. I referenced it in a post I wrote a few days after I returned to the country. It has been mentioned with approbation by politicians, decision-makers, UN aid workers and many more.

It is important to understand that resilience, whether of individuals, communities, organisations or states, is not a given. Resilience needs to be supported and preserved. By its very nature, resilience is something that operates over time and so it is important to think and act carefully in the immediate and short term to minimise the risks of undermining longer term resilience.

To date, little has been said about state resilience. Vanuatu, like other Melanesian countries, is often characterised as being relatively weak in terms of state capacity. It is certainly the case that beyond the capital city Port Vila the state’s presence is not extensive. There are schools, aid posts and sometimes police posts. They are often closed because there is no-one to staff them or there are no resources to allow for service delivery. Critical infrastructure, including roads, bridges, wharves and airstrips is poorly maintained and likely to be out of action especially when weather conditions deteriorate. All of these conditions pertained long before the arrival of Cyclone Pam.

So how resilient has the state of Vanuatu proved to be in the face of this event, the most significant natural disaster to strike the country in its (almost) 35 years of existence? In the 2+ weeks of immediate response, the machinery of government showed great resilience by showing up and taking control of the emergency response. Further to previous investment in the National Disaster Management Office, including through support from the Vanuatu Humanitarian Team, a coordinated and planned approach to assessment and distribution was able to be implemented from day one.

However, as we move to the medium and longer term, gaps in the resilience of state agencies are likely to appear. The public servants who are needed to lead the government’s work in coordination of aid are largely unavailable as they are working within the Emergency Operations Centre on distributing aid. Donors often complain that the central agency responsible for coordinating aid to Vanuatu does little in this regard. The public servants that work within this unit complain that donors do not do enough to comply with what they want to see happen in terms of coordination. The truth of the matter no doubt lies somewhere between these two positions. However, now more than ever, the people of Vanuatu need their government and the country’s donor partners to work together to deliver aid in ways that not only preserve state capacity but capitalise on opportunities to enhance it.

The politics of aid are well known and we have seen them play out in Vanuatu and the wider region or more than one occasion. It is too idealistic to think that all of the mistakes of the past will be avoided in Vanuatu over the coming weeks, months and years. And it is too cynical to say that there is nothing that can be done to prevent the aid circus from overrunning local leadership.

The path for government, policy makers, donors and those who advise them needs to be one based on putting the long term interests of the country and people of Vanuatu first and being committed for the long haul. There are a number of principles that I believe can and should underpin future decisions and developments on all sides. They include:

  • Investing in knowledge aggregation and sharing drawing on expertise, innovative thinking and experience from a wide range of sources.
  • Working with what is already in place, to achieve better multiplier effects and returns on previous and current investments.
  • Taking all steps available to reduce transaction costs in country
  • Managing the risks associated with individuals and organisations manipulating situations to prosecute vested interests rather than achieving objectives of national importance.

My island home: the first week after Cyclone Pam

Usually the phrase ‘coming home’ signifies a return to all that is familiar and predictable. On Monday I came home to something that is far from familiar and to a situation characterised by frenzied activity, heightened awareness and rapid-fire exchanges of information and decision-making.

Nothing looks the same. Where once there was green, now there is brown. The wholesale destruction of vegetation has revealed buildings that were previously surrounded by bush. Landmarks that were present this time last week have gone. This does nothing to assist my already very flaky sense of topography. Nothing sounds the same. Usually when I write in my lagoon-side office, I hear birdsong, occasional barking from dogs and maybe the voices of people going past on canoes or kayaks. Now I work with the sound of chainsaws and bush knives in the background interspersed with the sound of military and civilian aircraft criss-crossing the skies.

Vanuatu has experienced cyclones before and will undoubtedly experience them again. Cyclone Pam is significant in terms of her impact both in breadth and depth. Initial assessments are still being conducted but preliminary information is that all of the occupied islands of the country have been affected, with the possible exception of Malakula. Reports from aerial assessments undertaken during the past couple of days are indicating extensive damage, especially in the southern part of the country, affecting buildings, airstrips and gardens. This last is of particular concern in terms of longer-term food security as over 70% of the population relies on subsistence farming. For now people will eat what can be salvaged from the storm. Some will have livestock that they can kill. I just read that in Middle Bush, Tanna, where all are safe (largely thanks to having endured the cyclone in daylight hours), people are making use of solar powered driers to convert manioc into flour before it rots. That will be a much valued resource in the weeks and months to come.

Those of you who have visited Vanuatu (and certainly if you have visited me) will know that drinking kava at the end of the working day is an important activity for a sizeable segment of the community. We get to sit outside, chat quietly, do some networking and drink the most foul tasting substance you would ever voluntarily put in your mouth – it is a mild soporific that produces effects such as numbed lips and general relaxation. I had expected that kava bars would be either non-operational or out of stock (most of the kava sold in Port Vila comes from other islands such as Pentecost, Ambrym or Ambae). Never have I been so pleased to be proved wrong. I spent Monday evening with some friends at one of my favourite kava bars. The two wooden huts where kava and food are sold are intact but the rest of the place is trashed. This kava bar was burned to the ground in October 2012 and only reopened late last year. The owners (who I have known for 18 years) told me – “last time we waited two years to start selling the kava again but this time we waited two days”. They were doing a roaring trade, lots of it being sold as ‘plastics’ (recycled drink bottles filled with kava for take-away). But there was enough for those of us who were there to enjoy a couple of shells in the peace and quiet.

I’ve been asked “How can Vanuatu recover?”, and the answer I have given is: we are recovering. This is a resilient country populated by resourceful people and we are working together to get things back on track. There are many challenges ahead: logistical, political, economic and social. There is need for much assistance and we know it is on its way. When it gets here, it will find us already working hard in our island home.