Vanuatu’s GDP was USD 1,148 million (ADB, 2012) yielding a per capita income of USD 2,870 in 2011, World Bank (2012). The economy is estimated to have expanded by 4.3% in 2011 but its average rate of growth since 2000 is 3.4% per annum, World Bank (2012). It supports about 180,000 people and until recently, Vanuatu has had the highest and most stable rate of population growth. However, the population has declined due to a slowdown in natural fertility. Vanuatu’s net migration rate is virtually zero. This economy is relatively dependent on services and agricultural sectors, which make-up 68% and 21% of GDP, respectively, while the manufacturing sector’s growth is below its desired level, Trade Policy Framework (2012). Despite its development constraints, Vanuatu has important advantages in its strong traditional and culture (which promotes social stability and family welfare), has fertile and good stock of land, marine resources and a pristine environment. Vanuatu’s economic development is hindered by its dependence on a few primary commodities, vulnerability to natural disasters and scattered islands. Vanuatu was ranked 125 on the global HDI scale with a score of 0.617, UNDP (2012).
Baseline Poverty Analysis
Based on the 2006 HIES data, the Vanuatu MGD Report (2010) shows that 6% of households (or 7% of population) experienced food and 13% of households (or 16% of population) were in basic needs poverty. The estimates show that 10.8% of rural population was below the basic needs poverty line. The incidences of poverty using USD 1.00 and USD 1.25 per day inculcators were 7.0% and 9.2%, at national level, but were the highest in the rural areas (5.0% and 6.4%). The poverty gap index and its squared value were 3.8 and 2.0 for the rural areas. The quintile distributions, especially of the poorest 20% were 5.7 for Vanuatu and 5.9 for rural areas. Although the national, rural and urban vulnerabilities are the same at the lower end, Vanuatu’s rural population is dispersed across more than 80 islands and the access to resources, employment opportunities and formal markets becomes limited as distance from major urban centres increases. In 2006, nationally 9% of employed persons had their incomes not more than the basic needs poverty line but only 8% of these aged 10 years or more in rural areas lived in such households.
Gender related indicators point to a lower level of welfare for women. Data show women’s employment is lower than men’s in both rural and urban areas as female employability is limited. The average gross women’s wages were 85% equivalent of the male’s and the male and female employment to population ratios were 79% to 73%, respectively. There are limited data on youths but poverty of opportunities is an important challenge for the young graduates. Youths account for over 21% of population and consequently, Government’s educational reforms place greater emphasis on life and technical skills. Other international agencies such as the Oxfam also target skills development in Vanuatu, see Oxfam (2012). The Government via its PAA and PLAS is promoting investment in rural areas but there is no poverty reduction strategy for Vanuatu.
Agriculture and Rural Development
Agriculture directly supports about 75% of total population with an estimated 41% of land (12,190 sq km) suitable for cultivation but with limited use of its 200 nautical mile EEZ. Over 90% of land is under customary tenure but farming systems consist of both subsistence and large commercial farms mainly producing copra, kava, cocoa and beef. Vanuatu’s fertile soil and favorable climate provide potential comparative advantage in organically grown low-volume but high-value agriculture. Total exports were close to USD 50 million while imports were USD 285 million in 2010, World Bank (2012). It has very few major animal diseases and a benign climate well suited for extensive low-input livestock production. Farming infrastructure (abattoir, quality control and veterinary inspection systems) is well established but meat handling and quality control needs attention. Vanuatu’s fishery is under-explored with limited local participation and inadequate coastal management. Local artisanal fishing can make a greater contribution to rural incomes, nutrition and self-reliance. Forestry is slowly developing with areas of cyclone resistant whitewood being established. Sandalwood is also important with its export earnings estimated to be over USD 2 million for the period 2007-09. However, 30% of land is forested and most of which is unsuitable for commercial logging.