Vanuatu

The objective of this study is to fill a gap in the expanding literature on country-specific, regional and global financial inclusion. This is the first study in which the issue of inclusion in the context of the Pacific island economies is systematically investigated. Using Vanuatu as a case, and recently available demand side survey data provided by the country’s central bank, the results of the study indicate that exclusion is mainly voluntary. Determinants, motivations, and barriers of financial inclusion in Vanuatu are discussed using a range of controls. The use of a formal bank account is more popular in Port Vila and Luganville compared to other regions of the country. Higher income, better education and age are positively associated with greater use of formal accounts. Women are more likely to have general savings and formal credit compared to men. However, regardless of the ownership of a bank account, women are more likely to report savings over the past 12 months, and make deposits and withdrawals from their bank accounts more frequently. Policy implications are discussed.

The study builds on the National Green Export Review (NGER) of Vanuatu and leverages UNCTAD expertise in key analytical areas, including non tariff measures, voluntary sustainability standards (VSS), the trade agriculture gender nexus, and pro poor structural rural diversification through trade. Invaluable support was provided by the Government of Vanuatu, in particular, the Department of Industry, which generously shared information, facilitated multi stakeholder consultations and reviewed the final draft. The information in this report has been gathered from various sources, including interviews with key stakeholders in the country. To this purpose, missions were carriedout in Port Vila, Vanuatu, in 2017 and 2018. Interviews were conducted with public and private stakeholders, including representatives from the Department of Industry, the Department of Agriculture and Rural Development, the Department of Women’s Affairs, the National Statistics Office, the Government Chief Information Officer, the private sector, International Organisations and the donor community.

Vanuatu is at a critical juncture in its development pathway: the country needs to dynamise and transform its rural economy by building on its small-scale and diversified farming system, and leveraging traditional agro-ecological approaches. Expanding on the NGER, this study has outlined upgrading trajectories in the cocoa and coconut sectors that amplify the competitive strengths of small-holder agriculture, leverage agro-ecological practices and place emphasis on women’s roles and knowledge. These trajectories combine social welfare objectives (food security and nutrition, and social inclusiveness, including gender equality), environmental goals (protection of biodiversity and climate-change resilience), and economic objectives (increased income). They cater to both domestic and export market outlets. They show how trade can drive transformational systemic changes at the local and national level towards achieving inclusive sustainable development, beyond aggregate welfare gains.

The goal of this report is to assess the social inclusiveness and pro-poor sustainability of efforts to upgrade, expand and diversify the cocoa and coconut sectors in Vanuatu. Specifically, the analysis screens trade upgrading and diversification policies in the two sectors for their potential to either benefit or negatively impact the goals and targets embedded in the country’s NSDP. Called “Vanuatu 2030: The People’s Plan”, it is the country’s highest-level policy framework. It provides an inescapable normative benchmark for assessing the legitimacy of trade policy options. The Plan charts a holistic development path that strikes a balance between the social, environmental and economic pillars of sustainable development. Tailoring the 2030 Agenda to Vanuatu’s context, the Plan re-assesses material wealth objectives through Melanesian values of respect, harmony, unity and forgiveness, and brings to the forefront of policy discourse intangible values and communal assets.

Since the vast majority of Vanuatu’s inhabitants live and work in rural areas, rural development is the main driver of poverty reduction and will be essential to achieving Sustainable Development Goals (SDGs). It is anticipated that raising rural incomes to the level of urban incomes will help reverse the current pattern of rural-urban migration that is fuelling unsustainable urbanisation in Vanuatu.

This study is part of a series of UNCTAD publications that focus on upgrading and diversifying specific agricultural sectors of rural economies in developing countries, with a view to raising living standards among small-scale farmers in a context of sustainable development, female empowerment and food security.

UNCTAD’s National Green Economy review (NGER) for Vanuatu has identified coconut and cocoa as dynamic sectors in which the country has a clear comparative advantage. According to the NGER, the two sectors offer significant opportunities for downstream processing and increased export value through product differentiation, including organic certification. The impacts on sustainability of upgrading trajectories in cocoa and coconut are assessed in chapter 4. To inform the analysis, it is important first to consider key aspects of the domestic production and marketing chain. Indeed, technical details about farming structures, marketing channels and processing techniques are of major importance in assessing social inclusiveness, food security and environmental impacts. Detailed assessments of Vanuatu’s cocoa and coconut chains have been carried out elsewhere (AECOM Services Pty Ltd. and PHARMA, 2016; Pacific Agribusiness Research & Development Initiative, 2011; Pacific Agribusiness Research & Development Initiative, 2012; UNCTAD, 2014a; UNCTAD, 2016). Suffice it here to recall some of the main features of cocoa and coconut production, processing and marketing that have a significant influence on the analysis in the following chapters.