The Comprehensive Reform Program (CRP) endorsed by the National Summit in June 1997 which outlines a vision and a set of strategies for the economic and social development of Vanuatu.

The three major components of the Government's strategy are:

• Stable Government including the maintenance of macro-economic stability, good governance and public sector reform
• Private Sector Development based on private sector dynamism, openness to the global economy and sector policies to promote growth
• Social Equity and sustainability measures covering education, training, health, gender, industrial relations, rural/urban equity, and custom and the environment.

The government is particularly interested in encouraging investment in agriculture, tourism, fisheries, forestry, and timber products. Sustainable considerations are an important priority of the government to ensure that the natural resources are sustainable used without exploitation.

The government is trying as much as possible to encourage labour intensive industries using the local products that will lead to import substitution.

Apparently most of the CRP policies are directed at building a faster growing economy. Growth will bring higher incomes and hence higher standards of living.

Investment Policy

The overall aim of Government policy is to create and foster economic growth. To date, the governments of Vanuatu have achieved a track record of reasonably sound economic management with an emphasis on financial stability.

Vanuatu encourages and welcomes foreign investment. In order to facilitate foreign investment the Government has enacted a Foreign Investment Act to create a favorable environment for private sector operations. This major change promises to relieve many of the hurdles previously encountered.

The Government has comprehensively reviewed Vanuatu’s foreign investment policy. Documents relating to Economic Reform and proposals to restructure the Public and Private sectors were introduced to Parliament in early 1998.

In July 1998 the Government passed the Foreign Investment Act, which provided for the establishment of the Vanuatu Foreign Investment Board (VFIB) now known as Vanuatu Investment Promotion Authority (VIPA).

From then VIPA encourages the formulation of a more transparent and open investment environment as well as faster processing of investment applications. Taxation arrangements and budgetary reforms are also being reviewed which results in significant changes to the current arrangements.

Regulatory Framework and Investment Facilitation

Transparency

Statutory (Legislative) Requirements

The Foreign Investment Act No.15 of 1998 governs foreign investments in Vanuatu. A Foreign Investment Board (VFIB) was established on August 24 1998 and the Act was reviewed in 1999 and 2001 and VFIB was changed to VIPA. In addition, a comprehensive tourist development plan was formulated to help refine government policy for development in the country over the next ten years.

All businesses are required to operate with a valid business license under the Business License Act.

Investment Review and Approval

New investors require approval from the VIPA before establishing a business in Vanuatu. This requirement will involve completion of an Investor Application Form, which should then be submitted to the VIPA Secretariat. The average period of time involved in processing an investment application from the point of submission to final approval is three weeks.

Applications are required on a prescribe form and considered by the Chief Executive Officer of VIPA through the Research Section, followed by a submission to the VIPA Board for approval.

Foreign investors are expected to comply with relevant local legislations such as the Department acts, Municipal acts and Provincial acts. After the approvals, VIPA continue to monitor the implementation of the approved projects through the Certification Section in collaboration with other lined agencies.

Company/Business Structure

For offshore financial activities, the most commonly used vehicle is a private company registered as an ‘exempted company’ or ‘international company’.

For certain offshore activities, trusts are used as business entities.

A private local company or sole trader (or use of business name) is the most common form of business registration within Vanuatu.

As there is no direct company or personal taxation, fiscal incentives favoring particular types of business structure are not a consideration in Vanuatu.

Most Favored Nation Treatment / Non-Discriminatory Between Source Economies

Not applicable.

National Treatment

The Government of Vanuatu has an ‘open regime’ policy. Therefore, foreigners should enjoy all the same rights and be subject to the same obligations as a national engaged in similar activity. There are only a few special activities from which foreigners are exempt.

Foreigners are afforded the same protection as residents under the Constitution of Vanuatu, but they are excluded from participation in any political activity.

Restrictions and Limitations on Foreign Investment

Reserved Activities

Most industries are open to foreign investment however a list of Reserved Investments restricts certain business operations to ni-Vanuatu only and that is the Indigenous population.

Access to Raw Materials

There are no current limitations on access to imported raw materials (subject to quarantine restrictions).

Access to Land

About 90 percent of land in Vanuatu is owned according to custom, with the balance owned by the Government and a small portion by the private sector. Leases can be obtained for periods ranging from 50 to 75 years. The Government, through the Department of Lands, can facilitate negotiation of land leases with land owners. Undeveloped land must be improved within five years of acquiring a lease.

The Government intends to improve land administration by surveying and registering all land ownership and then identifying land that can be used for development.

Repatriation and Convertibility

Foreign Exchange Control

As there are no exchange controls in Vanuatu, foreign companies are free to repatriate profits and any income earned. Accounts may be opened in most major currencies.

Entry and Sojourn of Personnel

Special Visas

Persons who wish to engage in business in Vanuatu may qualify for residence by means of their business investment in the country. All new investors require a permit to enter and reside in Vanuatu. The residency permit requires a police clearance from the applicant’s country of usual residence. Work permits are normally required. Some limited exemption provisions for principals exist.

The level of investment affects the length of residency permit granted, for example:

Level of Investment US$ (approx) Length of Permit
860,000
425,000
212,000
126,000 15 years
10 years
5 years
3 years