Unlocking Economic Growth

The Vanuatu Foreign Investment Promotion Agency (VFIPA) is leading a critical review of Vanuatu’s Reserved and Restricted Investment Lists, aiming to create a more resilient, diversified, and investor-friendly economy. This review, set for completion by mid-2025, is a strategic response to evolving global economic trends and local challenges, including natural disasters and shifting market dynamics. Below are the key trends and insights derived from this initiative, supported by relevant data and analysis:

Current FDI Landscape

• Foreign-owned businesses in Efate total 927, with 161 located in the Port Vila CBD.
• The value of foreign investment in Efate stands at VUV 86.5 billion, contributing significantly to the local economy.
• Sectors like Information and Communications (234 businesses) and Wholesale and Retail Trade (160 businesses) dominate FDI, while others like Real Estate and Utilities remain underdeveloped.
• The review aims to reduce restrictions on foreign investment in underdeveloped sectors, encouraging diversification and reducing reliance on a few key industries.
• By opening sectors such as Real Estate, Utilities, and Professional Services to foreign investors, Vanuatu can attract much-needed capital and expertise, driving innovation and service quality.

Employment Impact

• Foreign-owned businesses in Efate employ 9,791 people, highlighting the critical role of FDI in job creation.
• The review seeks to unlock more job opportunities by attracting foreign investors to labour-intensive sectors like Manufacturing and Construction, which currently have 52 and 18 foreign-owned businesses, respectively.
• By easing restrictions, Vanuatu can accelerate post-disaster economic recovery and build long-term resilience, especially in the face of global market shifts and natural disasters.

Current Policy Framework

• The Reserved Investment List reserves certain activities exclusively for Ni-Vanuatu citizens, while the Restricted Investment List allows foreign investment under specific conditions.
• Since the enactment of the initial Vanuatu Investment Promotion Authority (VIPA) Act No.15 of 1998 [CAP 248] back in 1998 that has been repealed in 2019 and replaced with the current Foreign Investment Act No. 25 of 2019, no formal review has been conducted, making this reassessment a vital step in refining Vanuatu’s economic direction.
• The review will strike a balance between protecting local businesses and attracting foreign investment. For example, sectors requiring capital and expertise (e.g. Mining, Utilities) may be opened to joint ventures or foreign participation.
• This approach ensures that local entrepreneurs are not overshadowed while leveraging foreign investment to drive economic growth

Investor confidence is crucial

• • • The review aims to reduce the number of restricted activities, making Vanuatu more attractive to foreign investors while maintaining protections for critical sectors.
    • By creating a more adaptive and transparent investment framework, Vanuatu can enhance its Comparative Analysis with Neighboring Countries.
    • One of the key rationales for the review is to enhance Vanuatu's competitiveness for FDI in the region. A brief comparison with neighboring countries highlights the need for policy adjustments.
    • This approach ensures that local entrepreneurs are not overshadowed while leveraging foreign investment to drive economic growth

  

  • Fiji, for example, has seen improved GDP growth and higher "Doing Business" rankings after eliminating its restricted and reserved lists. Vanuatu's current framework, with 15 reserved and 26 restricted activities, places it at a competitive disadvantage. By reducing these restrictions, Vanuatu can align itself with regional trends and attract more sustainable investments

Review outcome will support Government quick recovery efforts

• • The review also aligns with the government's new policies and initiatives, such as the development of economic hubs/corridors and mini-townships. By opening up certain activities to foreign investors, Vanuatu can attract advanced skills, technology, finance, and access to global value chains, which are essential for supporting these initiatives. This will not only enhance economic growth but also ensure that Vanuatu remains competitive in the region.

The review of the Reserved and Restricted Investment Lists represents a pivotal step in Vanuatu’s economic strategy. By liberalizing key sectors, attracting sustainable investments, and creating jobs, this initiative will position Vanuatu as a competitive and resilient investment destination. The successful completion of the review by mid-2025 will mark a significant milestone, ensuring that Vanuatu’s investment policies are aligned with its vision for sustainable economic development and national prosperity.