Executive Summary

Vanuatu's foreign direct investment inflows have come under sustained pressure in recent years (UNCTAD). Over the same period, the 2026 VFIPA Investor Survey identifies labour shortage and workforce related barriers, including staff decrease to seasonal work, as a growing and material concern for investors operating in Vanuatu.

The evidence indicates the barrier is one of implementation rather than investor demand. Businesses continue to register and seek to expand in Vanuatu, but a shrinking, mobile, and increasingly seasonal workforce is constraining their ability to operate and grow. Outbound labour mobility schemes, principally the Pacific Australia Labour Mobility (PALM) scheme and New Zealand's Recognised Seasonal Employer (RSE) scheme, have expanded rapidly and now draw more Vanuatu workers than any other Pacific Island country, at the same time as domestic sectors such as tourism, construction, and agriculture report acute skills and staffing gaps.

This trend or insight argues that labour market policy is now materially connected to Vanuatu's investment competitiveness, and that closing the gap between labour mobility governance and domestic workforce retention is one of the more cost effective levers available to government to help reverse the FDI decline.

The 2026 VFIPA Investor Survey, the primary evidence base, surveyed 1,033 businesses. Of these, 399 reported one or more operating difficulty, and 38.6 per cent of investors facing barriers cited issues that compound with the broader operating environment. Six businesses reported they are leaving Vanuatu permanently, and a further 60 raised concerns about their ability to continue operating.

Labour shortage and unskilled workforce was reported by 127 businesses, and a further 65 businesses separately identified staff attrition to seasonal work under RSE and PALM (referred to nationally as SWP) as a distinct concern. Combined, labour related barriers affect 192 businesses, close to one in five of all businesses surveyed, making workforce availability a growing and material concern for the investment climate rather than an isolated sectoral issue.

Representative investor feedback captured in the survey includes: "Every time we train a worker they leave for seasonal work in Australia or New Zealand," reflecting a recurring theme of skills drain, staff retention difficulty, and workforce reliability concerns across sectors.

The 2025 Vanuatu Labour Force Survey (VBoS and the Pacific Community) is the most current and authoritative source on domestic labour supply. It records a national labour force of 105,491 against a working age population share of 62 per cent of the total population of 343,320. The total labour force participation rate is 49.8 per cent, and labour underutilisation, the ILO's composite measure combining unemployment, underemployment, and available but unengaged workers, stands at 24.6 per cent nationally

Participation is higher for men (53.7 per cent) than women (45.7 per cent), while informal employment and labour underutilisation both run higher for women (59.5 per cent and 25.6 per cent respectively) than men (57.8 per cent and 23.7 per cent). Nationally, 58.5 per cent of employment sits outside the formal sector. Encouragingly, the employment rate has risen from 46.3 per cent to 47.5 per cent over six years, a gradual improvement that nonetheless leaves close to one quarter of the labour force underutilised.
For context, the ILO's 2024 country factsheet, drawing on the 2020 Census, recorded a lower labour force participation rate of 42.9 per cent and youth metrics not captured in the 2025 survey: youth unemployment of 9.7 per cent against a youth NEET (not in employment, education, or training) rate of 47.5 per cent. Read together, the two sources point to the same underlying picture: a workforce with real underused capacity, concentrated among youth and women, that is not translating into the skilled and reliable labour investors need.
By industry, the VBoS survey shows agriculture, forestry and fishing as the largest employer of men (29 per cent), followed by wholesale and retail trade (19 per cent) and construction (14 per cent). For women, wholesale and retail trade is largest (25 per cent), followed by agriculture (19 per cent) and accommodation and food services, the core of the tourism sector (13 per cent). Construction employs almost no women (1 per cent), a concentration risk given investor reported shortages of skilled tradespeople in that sector.

The 2025 VBoS survey provides a direct household level view of labour mobility that complements the national programme data cited by the ILO. Of Vanuatu households, 10,115 former household members were abroad at the time of the survey, a household emigration rate of 11.9 per cent, and 78.6 per cent of departures were explicitly for work related reasons. Australia is the leading destination (51 per cent of those abroad), followed by New Zealand (22 per cent) and other Pacific countries (20 per cent).

Among household members abroad, PALM long term placements in Australia are the largest single category (2,875), followed by RSE placements in New Zealand (2,439) and PALM short term placements in Australia (1,930). The top recorded occupations abroad are crop farm labourer (2,335) and hand packer (1,071), both directly competing with the same agricultural and horticultural skills base that Vanuatu's own agriculture sector and agro processing investors depend on.

Separately, the survey captures 26,876 working age household members who have ever been abroad and since returned, equivalent to 12.7 per cent of the working age population. Of these returnees, 62.4 per cent left specifically for seasonal work, and the survey's authors note that nearly two thirds of all migration recorded is driven by seasonal work programmes such as PALM and RSE. Critically, 78.9 per cent of returnees plan to return for further seasonal work, indicating this is a recurring cycle rather than a one off departure, which is consistent with investors' reports of repeatedly losing trained staff to the same seasonal pull. On a more positive note, 77.6 per cent of returnees report investing in Vanuatu, and 61.0 per cent specifically in productive assets such as land, housing, or business, suggesting that better structured reintegration could convert returning labour and capital into domestic investment rather than a repeated drain.

These VBoS figures are household survey based estimates of current and returned migrants and are not directly comparable in scope to the ILO's citation of total national PALM and RSE placements (9,462 and 7,100 respectively in 2022 to 2023). The two sources measure different things, programme level participation versus household level presence, but both point to the same conclusion: outbound seasonal labour mobility is now a structural, recurring feature of Vanuatu's workforce rather than a marginal one.

The Vanuatu Bureau of Statistics' Quarterly Statistical Indicators (QSI), December quarter 2025, tracks formal employment through Vanuatu National Provident Fund (VNPF) contributing membership. This shows steady growth, from 86,773 members in 2021 to 98,349 by the end of 2024, and a further rise to 109,134 by the third quarter of 2025.

This growth in formal employment is a positive signal of labour demand, but it sits alongside a still high informal employment share (58.5 per cent, per the 2025 Labour Force Survey), reinforcing that the shortage investors report is not simply a shortage of available workers but a shortage of workers moving into, and remaining in, formal, skilled employment. The QSI also records a 10 per cent quarter on quarter fall in air visitor arrivals in the December quarter of 2025, relevant to tourism sector labour demand, and a decline in cement imports of VT 96 million over the same quarter, a rough proxy for construction sector activity that should be read alongside investor reports of skilled tradespeople shortages in that sector. Vanuatu's overall trade deficit stood at VT 9,314 million in the December quarter of 2025, underlining the broader external pressure on the economy within which labour market policy sits.

The Santo Government Agencies Investment Breakfast Forum (July 2026) illustrates how these national trends present at the provincial level. Registered investors in Sanma Province grew 74 per cent between 2020 and 2024, rising from 89 to 155, indicating strong underlying investor appetite even as national FDI inflows contracted.

Santo investors report the same national pattern in concentrated form: unreliable domestic aviation (affecting tourism occupancy by an estimated 30 to 50 per cent in Santo), slow government approvals, and skills and workforce gaps, compounded locally by earthquake related damage to the Lands Department that has delayed title registration and lease renewals. Labour, skills, and workforce was identified as a 'quick win' discussion theme at the forum, alongside land access and investment incentives, with specific attention to work permit processing timelines, TVET pathways, and workforce retention mechanisms.

The labour and FDI trends set out connect to several existing national policy frameworks, offering government multiple entry points to act without requiring entirely new instruments. Resolving the labour shortage is not, and cannot be, a task for VFIPA alone: it sits at the intersection of labour, education and skills, immigration, and investment policy, and durable progress depends on coordinated action across the agencies responsible for each of these levers. VFIPA's role is to raise the evidence, advocate from the investor facing side, and coordinate with the agencies that hold the actual policy instruments:

• anuatu 2030, The People's Plan, Priority 3 and 4: increasing decent, productive employment opportunities and increasing labour mobility are both existing national objectives; this paper's evidence supports treating them as two sides of the same policy problem rather than separate work streams
• National Employment Policy (NEP) 2025 to 2030: the Department of Labour and Employment Services' policy development process is the primary vehicle for defining stronger governance of labour mobility schemes, including retention, reintegration, and skills matching mechanisms. This is where the substantive policy levers sit, and where VFIPA's evidence is best directed
• VFIPA Investment Promotion Strategy (IPS) 2026 to 2030: this is VFIPA's own first formal strategy, and it independently identifies labour as a strategic risk to its mandate. Its Economic Context chapter states that the share of the ni-Vanuatu labour force leaving under mobility programmes has roughly tripled since 2015 to about 12 per cent today, and cites a 2022 industry survey of 478 enterprises finding the most acute skill shortages in trade (construction, electrical, plumbing), hospitality, and retail, the same sectors the IPS prioritises for FDI. The IPS explicitly names this an impediment to VFIPA's own retention and attraction work. Under its statutory function to advise government on national investment policy (Foreign Investment Act No. 25 of 2019), VFIPA has a clear basis to raise these findings with the relevant agencies and to convene or contribute to interagency coordination, but the IPS gives VFIPA an advisory and coordinating role in this space, not ownership of the labour policy response itself
• IMF 2025 Article IV Consultation: explicitly recommends expedited policy action on labour and skills shortages as a structural impediment to growth, giving international backing for a whole of government response.
• 2030 National Sustainable Development Plan (NSDP): provides the overarching development framework against which sector specific labour and investment reforms, led by the relevant agencies, can be reported.

Where these frameworks remain aspirational rather than binding, particularly on the specific mechanics of labour mobility governance, there is scope for VFIPA to advocate, alongside the Department of Labour and Employment Services, the Department of Education and Training, and the Department of Immigration, for more concrete, measurable commitments, such as defined work permit processing timelines, formal TVET fast track pathways for priority sectors, and a documented reintegration pathway for returning seasonal workers. The recommended next step below reflects this: VFIPA's role is to table the evidence and convene the conversation, not to resolve the issue unilaterally.

Sources
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● VFIPA, 2026 Investor Survey
● International Labour Organization, Vanuatu: Country Factsheet, 2024 (data drawn from the Vanuatu 2020 Population and Housing Census, the 2019 Household Income and Expenditure Survey, and ILOSTAT modelled estimates).
● UNCTAD, World Investment Report 2024 to 2025, FDI inflow data for Vanuatu.
● International Monetary Fund, 2025 Article IV Consultation, Vanuatu.
● Asian Development Bank, Pacific Private Sector Development Initiative, "Investment for Growth," 2024.
● World Bank, World Development Indicators, 2024.