Foreign Direct Investment (FDI) REPORT 2023
Foreign Direct Investment (FDI) remains a key contributor to Vanuatu's steady growth.
IN 2023
REGISTERED FOREIGN DIRECT INVESTMENT (FDI) INCREASED 18% OVER THE PREVIOUS YEAR AND 26% COMPARED TO PRECOVID-19 LEVEL.
FDI remains a key driver to Vanuatu's steady growth
- Despite prevailing global challenges and increasing constraints to trade and investment flows including the closing down of the country's national airline, established foreign investors chose to remain and continue their business operations in Vanuatu .
- In 2023, 861 registered foreign direct investments (FDIs) confirmed through their annual surveys as fully, partially or in the process of implementing their investment proposals, showing an increase of 18% over the previous year and 26% over the precovid-19 level.
- The economic benefits offered to Vanuatu and its citizens by those FDIs that are fully implementing their proposals cannot be denied, such as the number of jobs provided to the locals, contribution to the Government's revenue through licenses, turnover tax and other indirect taxes, exporting and linkages with domestic suppliers.
- These sustained activities and operations by the established foreign investments are critical and remain so especially during a period when the country's economic performance is not looking healthy and is reminded of the ongoing vulnerabilities and exposure to other risks and to take all necessary measures to keep the balance of risks to the downside (IMF Article IV Mission Report-July 23 2024)
- Growth in 2023 was estimated at around 1.0% with a marginal increase in 2024 by close to 2%, driven by tourism, infrastructure and constructions projects. These are sectors in which FDI is dominant.
The Services Sector remains a key engine for Vanuatu's growth
As a result of unprecedented factors that seriously disrupted cross-border investment and trade by global investors, economic activities in the services sector remained strong.
According to the Agency's FDI registry, the services sector remained dominant accounting 83% of the total established FDI in 2023 supported style by a wide range of activities in the following industries:
- Accommodation and Food Service Activities (Tourism)
- Finance and Insurance Activities
- Information and Communication
- Real Estate Activities
While Industry and Agriculture, Fishery, Forestry and Livestock sectors accounted 15% and 2% respectively
Substantial support through the Government's special subsidy scheme have been awarded to these 2 sectors to boost production and value addition for export. Most of the domestic farmers have benefited from this scheme and outcomes are yet to be seen.
FDI remains a key contributor to Vanuatu's formal employment
With the following industries as major contributors.
- Accommodation and Food Service Activities (Tourism)
- Finance and Insurance Activities
- Information and Communication
- And Real Estate Activities
FDI can assist the Government achieves its decentralization policy - ONLY if business environment support investors changing priorities.
- The established 861 investments can have significant spill-over effects once fully implemented
- Improved infrastructure - This is Government's current top priority which will attract re-investments and new ones in strategic locations other than Port Vila and Efate.
- Government's mini-township initiative - Through the Government's new PPP legislation, partnerships with foreign investors may see this development taking place in outer provinces
Government's key essential services are now getting established in other provinces, for example border entry compliance, passport printing services and commercial banking facilities. The need to boost primary production and promote entrepreneurship in communities is critical. Introducing foreign direct investment into these locations can help communities engage in emerging opportunities in innovation-driven sectors and sustainable investment.
This can be achieved only if we offer the right type of investment regimes that align with and support investors long term strategies and priorities.