Fast growth in the Pacific is possible – look at Vanuatu

Stephen Howes and Nikunj Soni1

vanuatu reaching new heights

The importance of Vanuatu’s growth – dispelling the myth that Pacific island economies cannot grow
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Growth in Vanuatu has accelerated in recent years. This paper argues that Vanuatu’s growth acceleration is important for the Pacific – it dispels the myth that the Pacific island economies cannot grow.The paper clarifies that Vanuatu’s experiment confirms the range of factors which are important for growth in the Pacific. In this regard, the document points that macroeconomic stability has been important, but is far from the only factor underpinning growth.Key messages include:

  • Vanuatu’s recent growth has been led by the private sector, not by aid
  • Vanuatu’s upsurge in tourism and construction would not have been possible without an active land market
  • Vanuatu has also benefited from deregulation (i.e. the opening up of the telecom and air travel sectors)
  • in addition, social stability underlies Vanuatu’s recent success
  • moreover, Vanuatu’s recently-gained access to foreign labour markets boosts its growth prospects

Nevertheless, the document states that Vanuatu’s future is not assured, considering that all small island economies are volatile and easily destabilised. On this point, the author notes that Vanuatu has a long way to go, and faces a wide range of reform challenges, such as:

  • improving health and education indicators
  • promoting further structural reform
  • reducing corruption
  • maintaining social stability
  • ensuring law and order
  • promoting equity

Yet, the author emphasises that Vanuatu has gone much further than achieving macroeconomic stability, and that it has good prospects for long-term growth.

The importance of Vanuatu’s growth – dispelling the myth that Pacific island economies cannot grow
View full report
Growth in Vanuatu has accelerated in recent years. This paper argues that Vanuatu’s growth acceleration is important for the Pacific – it dispels the myth that the Pacific island economies cannot grow.The paper clarifies that Vanuatu’s experiment confirms the range of factors which are important for growth in the Pacific. In this regard, the document points that macroeconomic stability has been important, but is far from the only factor underpinning growth.Key messages include:

  • Vanuatu’s recent growth has been led by the private sector, not by aid
  • Vanuatu’s upsurge in tourism and construction would not have been possible without an active land market
  • Vanuatu has also benefited from deregulation (i.e. the opening up of the telecom and air travel sectors)
  • in addition, social stability underlies Vanuatu’s recent success
  • moreover, Vanuatu’s recently-gained access to foreign labor markets boosts its growth prospects

Nevertheless, the document states that Vanuatu’s future is not assured, considering that all small island economies are volatile and easily de-stabilised. On this point, the author notes that Vanuatu has a long way to go, and faces a wide range of reform challenges, such as:

  • improving health and education indicators
  • promoting further structural reform
  • reducing corruption
  • maintaining social stability
  • ensuring law and order
  • promoting equity

Yet, the author emphasizes that Vanuatu has gone much further than achieving macroeconomic stability, and that it has good prospects for long-term growth.

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