Source: Small Island Developing States
By Armida Salsiah Alisjahbana
The Pacific Island Developing State of Vanuatu has emerged as one of the region’s great success stories. Vanuatu has joined the ranks of Samoa and the Maldives as one of only six countries to graduate from being a least developed country (LDC) since the category was introduced by the United Nations in 1971.
This historic achievement is the result of major development gains and strategic planning. It shows that the country has successfully raised levels of income and improved social development indicators, with marked declines in mortality rates and significant progress in education. All of these are factors the UN regards as critical in determining whether a country is considered as an LDC or not.
Despite these development successes, accelerated actions are urgently needed to ensure Vanuatu can achieve the Sustainable Development Goals (SDGs) by 2030.
Upon graduation, Vanuatu will no longer be eligible for international support measures granted to LDCs. Unilateral and non-reciprocal trade preferences under Duty-Free Quota-Free schemes from various developed and developing trading partners will be off the table.
Fortunately, based on current trading patterns, the overall impact of losing preferential market access will be minimal, as more than half of Vanuatu’s main exports are being traded under negotiated duty-free market access arrangements, rather than under LDC concessional measures. Vanuatu will also remain eligible for financing on concessional terms under the World Bank’s International Development Association (IDA) as it is afforded a special status as a ‘small island economy.’
Graduation could improve Vanuatu’s “image” and attract larger flows of foreign direct investment, as several other graduated countries have experienced. Graduation is taking place, however, at a time of significant risks to the global economic situation. Unexpected shocks such as the unprecedented COVID-19 pandemic are posing grave challenges to development.
Despite acting swiftly when confronted with the rapid spread of COVID-19, by banning travel among islands, closing international borders, and imposing curfews on businesses, Vanuatu has experienced severe impacts of the pandemic. The collapse of tourism has had widespread repercussions on the economy, with arrivals in the first half of 2020 down by 65% compared to the first half of 2019. This contributed to an estimated 70% job or income loss in the first six weeks after borders were closed, and is an important factor in the decline in output of 8.3% expected in Vanuatu for this year. The country also recorded its first official case of COVID-19 in November, having successfully warded off the virus for many months.
As a developing country, Vanuatu also remains vulnerable to other external shocks. The threats of climate change are very real. The first category 5 tropical cyclone of 2020, Tropical Cyclone Harold, demonstrated this as it passed over Espiritu Santo, Pentecost Island, and Ambrym earlier this year, displacing an estimated 80,000 Ni-Vanuatu people, over 27% of the nation’s population. This was the second-strongest cyclone to affect Vanuatu, following Tropical Cyclone Pam of 2015, which suggests such storms are becoming more frequent as our climate changes.
The UN family has supported Vanuatu in its independence since 1980, and provided assistance through the UN Economic and Social Commission for Asia and the Pacific (ESCAP), since 1984. More recently, this support includes identifying avenues to mobilize financial resources domestically, in recognition that achieving the SDGs will require significant resources, especially in such a vulnerable environment.
Dedicated technical support is being provided for Vanuatu’s smooth transition strategy (STS) for graduation, which builds on ‘Vanuatu 2030 The Peoples Plan,’ the country’s National Sustainable Development Plan for 2016 to 2030.
As we focus on building back better from the COVID-19 pandemic, ESCAP stands ready, along with the wider UN family, to continue supporting Vanuatu in its development aspirations and in implementing a smooth transition. This includes support to link the STS with budgets, offering specialized technical assistance to strengthen capacities in trade negotiations, and developing productive capacities in Vanuatu, thereby enabling better structural transformation and diversification of the economy.
This year, Vanuatu celebrates 40 years since its independence. By working together, we can build resilience to external shocks in the Pacific region to ensure Vanuatu’s development journey continues to be a success story in the decades to come.
The author of this guest article, Armida Salsiah Alisjahbana, is Under-Secretary-General of the UN and Executive Secretary of the UN Economic and Social Commission for Asia and the Pacific (ESCAP).