Vanuatu: Investir

FDI in Figures

According to the 2022 World Investment Report published by UNCTAD,  FDI flows to Vanuatu decreased by 16% from USD 35 million in 2019 to USD 30 million in 2020, mainly due to the global health and economic crisis triggered by the Covid-19 pandemic. It reached USD 26 million in 2021. The stock of FDI is estimated at USD 666 million in 2020 and 691 million in 2021 (UNCTAD, 2023). The pandemic and a series of tropical cyclones prompted the postponement or cancellation of many investment projects. Traditionally, the industries that attract most FDI are food and wood processing. Australia is the main source of foreign investment in Vanuatu's economy (The Australian aid budget for Vanuatu is expected to reach USD 75.6 million in 2021-22, according to the Australian Department of Foreign Affairs and Trade) with a focus on tourism (two-thirds of long stay tourists to Vanuatu and the vast majority of cruise ship passengers come from Australia), finance and construction, followed by Japan and New Zealand. The main undergoing project is the Vanuatu Aviation Investment Project (VAIP), which is supported by the World Bank and is aimed at repairing and rehabilitating Vanuatu’s three main airports, especially the Bauerfield International Airport. New initiatives and essential reforms contributing to the overall regime of doing business in Vanuatu have been undertaken on a regular basis as part of the Government's commitment to improving the country’s business environment thereby enhancing its attractiveness for private investors and encouraging greater investment expansions to the rural areas of the country (VIPA, 2022).

The factors that encourage foreign investors in 2023 include an attractive tax system (no direct taxes), lack of exchange controls, a stable political situation and a particularly proactive FDI promotion agency (the Vanuatu Investment Promotion Authority - VIPA). The country's vulnerability to natural disasters, the weakness of its infrastructure and its geographical isolation remain some of the potential hindrances to investment. Property rights are poorly protected, and investment is deterred by the country’s inadequate physical and legal infrastructure. Business activity is further limited by rigid labour regulations and widespread corruption. Foreign investors may lease but not own land, and investment in some sectors of the economy may be screened by the government. The country has been working on the creation of Economic Development Zones (EDZs) for years although they have not materialized yet. The enforcement of contracts, the protection of minority investors and the resolution of problems related to insolvency are three points on which the country has a large margin of progress. The COVID-19 pandemic puts Small island developing economies in dire straits. A small and narrow economic base, high degree of openness and significant dependence on few large developed countries make small island economies extremely vulnerable to global economic shocks. These economies are often at the receiving end of global crises, as they are highly dependent on external flows—trade, remittances and external capital and borrowing—compared to other groups of developing countries (United Nations, 20223. The collapse in tourist arrivals not only directly affects income and employment in airlines, ground transport and hotels, but also adversely affects the rest of the economy, including agriculture and construction. Falling tourism, and subsequently, reducing tax revenues, will exacerbate fiscal balances of many small island economies and also reduce the flow of foreign direct investment (FDI), as the tourism sector is typically the largest recipient of FDI.

Vanuatu’s capital and financial account flows were mainly driven by donor project-related capital grants, and FDI in 2022 (IMF, 2023).

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Latest Update: November 2023