RESTRICTED
WORLD TRADE WT/ACC/VUT/2
30November 1995
ORGANIZATION(95-3833)
Original: English
ACCESSION OFVANUATU
Memorandum ontheForeign Trade Regime
TheMemorandum ontheForeign Trade Regime submitted bytheDepartment ofIndustry,
Trade andCommerce oftheRepublic ofVanuatu isreproduced hereunder.
__________________
Inaccordance with theprocedures indocument WT/ACC/1, members arerequested to
communicate totheSecretariat by(sixweeks fromdateofissue), anyquestions theymaywishtoput
concerning thematters dealtwithinthememorandum, fortransmission totheauthorities oftheRepublic
ofVanuatu.WT/ACC/VUT/2
Page2
TABLE OFCONTENTS
Page
I. INTRODUCTION 4
II. ECONOMY AND FOREIGN TRADE 5
1. Economy 5
(a-d)Agriculture, Fisheries andForestry 5
International Finance Centre 6
Aims ofGovernment Policy 6
Public Sector Reform 7
Recent Economic Development 7
Savings andInvestment 7
Inflation andMonetary Development 8
Private Sector Policy andPrivatization 8
2. Foreign Trade 9
III. TRADE REGIME FOR GOODS 10
A. FOREIGN TRADE REGIME 10
1. Import regulations 10
(a) Theevolution ofthecustoms tariff regulation 10
(b) Customs tariff nomenclature 10
(c) Import charges andfees 14
(d) Taxation regime 14
(e) Tariff preferences 16
(f) Non-tariff measures, quotas andlicensing system 18
(g) Customs valuation 19
(h) Rules oforigin 19
(i) Customs formalities 19
(j) Standards andcertification 19
(k) Sanitary andphytosanitary measures 19
2. Export regulation 19
(a) Customs tariff nomenclature 19
(b) Export licensing system 20
3. Export incentives 20
4. Regulations oftrade intransit 20
B. OTHER POLICIES AFFECTING FOREIGN TRADE 20
(1) Industrial policy 20
(2) Agricultural policy 21
(3) Financial, budgetary andfiscal policy 22WT/ACC/VUT/2
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Page
(4) Foreign exchange andpayment system, relations with
International Monetary Fund, andapplication offoreign
exchange controls 23
(5) Foreign anddomestic investment policy 24
(6) Government procurement 24
(7) State trading enterprises 26
(8) Free-trade zones 26
(9) Subsidy policy 26
(10) Freeeconomic zones 26
(11) Preferential trade arrangements orother special
trade arrangements andagreements 27
C. VANUATU INSTITUTIONAL BASE FOR TRADE AND ECONOMIC
RELATIONS WITH THIRD WORLD COUNTRIES 27
1. Bilateral Trade, Economic Integration/Free-Trade
Agreement, Bilateral andPlurilateral Mutual
Recognition andother Sectorial Agreement and
Economic Agreement 27
2. Membership ofMultilateral Agreements andArrangements 28
C. SERVICES REGIME 28
1. Market structure 28
(a) Contribution toGDP oftheservices andofspecific
services subsectors 28
(b) Percentage share ofemployment -services sector
andspecific subsectors 28
(c) Volume, balance andcomposition oftrade in
commercial services 28
(d) Structure oftrade incommercial services by
countries andgeographic areas 28
(e) Value andcomposition ofstock offoreign direct
investment inservices 28
(f) Direction oflabour-related flows -networkers
remittances, migrants transfers andlabour income 28
2. Policy orientation 29
I. REGULATORY FRAMEWORK 30
(b) Consumption abroad 30
(c) Commercial presence 30
(d) Presence ofnatural persons 31WT/ACC/VUT/2
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MEMORANDUM ONTHE FOREIGN TRADE REGIME
REPUBLIC OFVANUATU
I. INTRODUCTION
TheRepublic ofVanuatu, formerly known astheNewHebridies, comprises 83islands inthe
south Pacific. Theislands havealandareaof12,200 square kilometres andarespread outina'Y'
formation, overadistance ofsome 1,000 kilometres from north tosouth. Several islands have
mountainous terrain covered inrichtropical rainforest andsome contain active volcanoes. More than
halfofthelandareaisaccounted forbythethreelargest islands ofEspiritu Santo, Malekula andEfate.
Thepopulation ofaround 160,000 isconcentrated onthethree major islands. PortVilahas
apopulation ofabout 24,000 andLuganville, theonlyother major town located onSanto, hasa
population ofabout 8,000 villages tendtobescattered around thecoastal zones ofthearchipelago and
havelimited communication andinfrastructure set-up linking tothetwocentres. TheMelanesian people
speak around 100dialects. Bislama, English andFrench areusedasofficial languages.
Vanuatu wasjointly governed bytheBritish andtheFrench untilindependence in1980. The
economy ishighly dualistic. Around 80percentofthepopulation livesinasubsistence lifestyle while
asizeable expatriate community livesinPortVila.
Copra, cocoa andcattle arethemaincashcrops, although coffee andkavaarealsoimportant
insome regions. Tourism, livestock ranching andthegovernment areimportant formal sectors. The
economy isvulnerable toweaknesses incommodity prices, fluctuations intourists arrivals andthe
destruction oftropical cyclones.
Vanuatu hasgood economic potential inagriculture, forestry andtourism.
External aidhasbeengenerous byinternational standards. Yetsince independence in1980,
economic development hasbeenslowanduneven. Although there hasbeenanimprovement inbasic
education andhealth indicators, realincome percapita islower thanitwasadecade agoandrural
people havemanaged tomaintain theirlevel ofcashincomes. Theeconomy iscurrently recording
modest growth buthigher general living standards willdepend oncontinued improvement inexternal
conditions andbetter domestic policies.
Vanuatu 'sThird National Development Planfortheperiod 1992-1996 hadidentified threemajor
themes forstructuring development activities.
l. Contribution toeconomic self-reliance
2. Improving thequality ofrural life
3. Achieving more balanced regional development
TheGovernment however, iscurrently emphasizing fourstrategies designed tobeconsistent
withthese themes:
*Decentralization - tocreate several regional growth centres sothateconomic
development isnotconcentrated onthecurrent urban centres
inPortVilaandLuganville.WT/ACC/VUT/2
Page5
*Public sector - toreduce thesize,improve theeffectiveness andreform the
public sector.
*Infrastructure - toaccelerate thedevelopment ofnewinvestment infrastructure
andimprove themaintenance andoperation ofexisting
infrastructure.
*Vocational - tobetter prepare thebulkofstudents foreducation village life
byfocusing more onpractical training inschools.
II. ECONOMY AND FOREIGN TRADE
1. Economy
TheVanuatu economy isbased onagriculture, which istheprincipal means oflivelihood for
about fourfifths ofthepopulation. Themaincashcropiscopra, although cocoa cultivation andbeef
production aregrowing inimportance. Thefishandforestry sectors havesignificant potential for
expansion. Inrecent years, theservice industry hasbecome important intheeconomy. The
fastest-growing areas have been financial andbanking services, tourism andtheregistration of
flag-of-convenience ships. TheFinance Centre ofVanuatu under theprotection ofstrict professional
secrecy andintheabsence ofexchange control anddirect taxation, hassignificantly contributed to
national income andGovernment revenue. Thegross domestic product (GDP) for1986-1989 based
on1993 figures, isshown inTable 1.
Table 1:Gross Domestic Product
GDP Agriculture
%Industry
%Services
%
1986 10.743 24 10 67
1987 10.743 22 12 66
1988 10.850 20 14 67
1989 11.343 21 14 65
Source: National Statistics Office.
Agriculture, fisheries andforestry
Theagriculture sector plays adominant roleintheeconomy, producing thecountry 'smajor
exports ofcopra andcocoa andtoalesser extent, coffee andbeef. Thebeefindustry, although relatively
small, isasignificant contributor tothecountry 'sexports. Theindustry ispredominantly conducted
ontheisland ofEspiritu Santo, where thecountry 'smajor slaughterhouse (constructed tointernational
standards) islocated. Theexport market isfocused onJapan, andtoalesser extent, NewCaledonia.
Thefishing industry issmall andmainly supplies thelocalmarket. Theindustry isconfined tothe
indigenous population andapermit isrequired toexport anyoftheindustry 'sproducts. Theforestry
industry isstillverymuch initsinfancy. Anactive andsuccessful forestry development programme
iscurrently under way, which aimstoraisetheeconomic standard within theindustry. Apermit is
required tocommence logging. Taxpreference fortheagriculture sector islimited toimport duty
exemptionsforgoodsimportedforagriculture,horticulture,livestockorforestry.Theexemptionallows
forthejointdecision oftheDirector ofCustoms andAgriculture toexempt fromimport duties plant,WT/ACC/VUT/2
Page6
machinery, materials andequipment (including purpose-designed vehicles andthelike), including spare
parts andaccessories. Inaddition import dutyexemptions canbeprovided onfueloilsintended for
useinstaticmachineryortopowervehiclesandequipmentengagedprimarilyinoff-the-roadapplications.
Theabove goods shallbeintended exclusively foruseonadevelopment project approved bytheDirector
ofAgriculture.
Thisimport dutyexemption doesnotcover vehicles designed forgeneral roaduseorlogging
equipment.
International Finance Centre
VanuatuisanoffshoreFinanceCentreandcommercialactivitiesinthecountryhavebeengreatly
influenced bythatstatus. Anextremely active Finance Centre isengaged intheadministration and
management ofoff-shore companies trusts andbanks. TheFinance Centre Association encompasses
theextensive business andfinancial facilities available toVanuatu, resulting fromits"pure" taxhaven
status; pure, because forbothresidents andnon-residents there arenopersonal orcorporate income
taxes, noestate orgiftduties, nocapital gains taxesandnoexchange controls. Vanuatu hasanextensive
secrecy provisions anddoesnotparticipate inanytaxtreaties.
TheVanuatu Government isextremely active initssupport oftheVanuatu economy, andis
committed tomaking thecountry thePacific foremost TaxHaven andInvestment Centre.
Aims ofGovernment policy
Government policy istoachieve self-reliance. Inpursuit ofthisgoal,emphasis hasbeenplaced
onagricultural improvement anddevelopment ofagro-based processing activities, particularly with
regard totheexport andimport ofsubstitution production.
Policyusedtopursuegoalof"agricultureimprovementanddevelopmentofagro-basedprocessing
activities, particularly withregards toexport andimport substitution.
There arenospecific policies forexport promotion.
Import substitution policy involves highprotective ratesranging from55percent-75 percent
onc.i.f.value oflikeorsimilar goods being imported intoVanuatu. Consideration ofwhether protection
istobeaccorded willdepend ontheability ofthelocalmanufacturer tobeabletoproduce products
ofquality andquantity anditscontribution totheeconomy.
AtthisdateVanuatu hasthreeimport orders inplace -oneconcerning importation ofpotatoes
(import restricted onseasonal basis) onerelating totheimportation ofT-shirts (restriction toprotect
localindustry) andthatrelating totheimportation ofrice,sugar, flour, tobacco products andcanned
mackerel (fiveproducts), imports restricted topayoffdebts ofVanuatu Cooperative Federation.
Allpersons, firms andinstitutions areeligible toimport potatoes during asix-month openperiod
ofimportation. There arenoregistration feenorapplication fee. There arenopublished listof
authorized importers.
TheT-shirt import restriction covers screen printed T-shirts withVanuatu motif.
Applications canbemade totheauthority butapproval isnotautomatic. Inthecaseofthe
import licence forthefiveproducts thereisapayment ofa3or4percentcommission totheVanuatuWT/ACC/VUT/2
Page7
Cooperative Federation based onthec.i.f.value-payment being made priortothedateofimportation.
Noadvance feeispaid.
Public sector reform: Section II:I(b)
Asameasure toreduce unnecessary costs andimprove efficiency services within ofexisting
Government entities, theVanuatu Government hasembarked onapolicy matter toprivatize and
corporatize four(4)principal entities asmentioned inourearlier note, namely water, electricity,
stevedoring telecommunications andbroadcastings.
Although themanagement andeffective running ofcompanies areinthehands oftheirrespective
Board ofDirectors andtheChief Executive, theGovernment strongly supports byanActofParliament
thatamongst other things, provides guidelines astohowtheindividual companies should perform and
carry outtheirrespective duties accordingly. Interestingly, theGovernment alsohasinvested shares
intoeachoperations andinthelongrun,theprivatized sectors continue toprovide ahugemonetary
return (dividends) totheGovernment which issubsequently utilized tofundadditional services to
Vanuatu. Vanuatu Government returns atleast40percentofshares (turnover perannum) from the
Unelco, 60percentfromVanuatu Broadcasting andTelevision, 25percentfromthestevedoring and
30percentfrom theTelecom Vanuatu Limited whilst thecable andwireless andtheCIDAlcatell
inParis controls themajor proportion oftheshares.
Recent economic developments
Economic Growth: Following several years ofvirtual stagnation thatreflected deeply-rooted
structural weaknesses andcyclone damage toagriculture, realGDP recovered in1989 picked up
momentum in1990ledbyasurge intheconstruction industry, tourism arrivals andtheestablishment
ofalocalbrewery andveneer andplywood manufacturing industries. However, thepromise ofthese
developments faded inthesecond halfof1991, when recession intheneighbouring industrial countries
began tobefelt,accentuated bytheairline deregulation inAustralia, which eventually lowered the
costofdomestic vacationing inthetropical north ofthecountry. Agriculture output contributed to
theslowdown asaconsequence ofasteepfallincopra output, which reflected lowcopra procurement
prices thatprevailed throughout theyear. Onthebasis ofearly estimates, realGDP probably rose
intherange of2-4percentin1991, significantly lessthanin1990. TheVanuatu economy slowed
further inthefirstmonths of1992 asaresult ofanunprecedented series ofcyclones andinvestors
uncertainty inthewake oftheDecember 1991 elections. There weresigns ofaneconomic recovery
bymid-1992 andtheeconomy appears tohave rebounded strongly inthefourth quarter, perhaps
reflecting areturn ofsome investor confidence. Notwithstanding therebound lateintheyear, real
economic growth wasprojected tobeinthesame levelof3-4percent.
Savings andinvestment
Duringthepastdecade,investmenthasbeenonarisingtrendrelativetoGDP,reachingacyclical
peakin1990during aperiod ofstrong commercial construction activity inPortVila(seeTable 2below).
However, much ofthisinvestment hasbeenfinanced bynetfactor income andnettransfers fromabroad.
Consequently, domestic savings arelowbyinternational standards having averaged onlyafew
percentage points ofGDP during mostofthe1990s. Thelowlevelofdomestic savings isindicative
ofseveral factors, including lowlevels ofnon-expatriate incomes, limited monetization oftheeconomy
outside urban areas, andlowrealrateofinterest onbankdeposits. Theresource gap(thedifference
between domestic investment anddomestic savings) hasbeenonadeclining trend inthepastseveral
years, butthegapisstillapproximately twothirds ofdomestic investment.WT/ACC/VUT/2
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Table 2:Savings Investment Balances, 1983-90
(PerCentofGDP)
1983 1985 1987 1988 1989 1990
Gross domestic investment 21.1 22.7 33.0 27.8 33.5 40.8
Foreign savings/a -9.5 -5.9 -6.4 -5.1 -4.1 -3.8
Gross national savings 30.9 28.6 39.4 32.9 37.6 44.7
Netfactor income -4.9 3.2 -6.5 -2.8 3.4 7.2
Netcurrent transfer/b 31.5 27.3 42.3 32.1 25.8 23.9
Resource gap 17.1 24.6 29.5 24.1 25.1 27.2
Inflation andmonetary developments
After falling significantly between 1987-1990, inflation inVanuatu asindicated bythe
Consumer Price Index fortotalurban areas, roseinthefirsthalfof1991reaching 8.5percentduring
thesecond quarter ofthatyear. However, therisewasaccounted forbytemporary factors, (particularly
long-delayed adjustments inbusandtaxifares) andinflation subsequently subsided backtoaround
5.5percent,which compares favourable totherecord ofprevious years. Along similar lines, allmajor
components ofthewholesale priceindex forconstruction materials decelerated overthecourse of1991.
Based onpreliminary indications, therewasafurther improvement ininflation in1992. Total liquidity
ofthebanking system, continued astrong expansionary pathin1991, rising by26percentduring
thatyear, alittlefaster thanaverage increased during theprevious twofiscal years. Larger increases
wererecorded inallmajor components ofliquidity withtheincrease being larger fortimeandsavings
deposits denominated inforeign currency, reflecting inpartinvestor uncertainty noted earlier.
Ontheassets sideofthemonetary accounts, domestic credit contracted by11percent,reflecting
sharplylowernetcredittogovernmentandmodestlyhigherclaimsontheprivatesector.Thecounterpart
tothelarge increases inliquidity wasamajor expansion innetforeign assets ofthebanking system
which somewhat expanded byasmuch as22percent, thenetforeign asset position strengthened
somewhat while commercial banks usetheadditional liquidity toreduce foreign liabilities byalarger
margin.
Private sector policy andprivatization
There isanincreasing worldwide realization thattheprivate sector must beemphasized if
sustained andgeneral improvements inthestandard ofliving aretobeachieved. Policies thatfocus
onthecompetitiveness andprofitability ofbusiness lieattheheart ofwhatisrequired toencourage
theprivate sector. Experience hasalsoshown however, thatitisimportant todevelop policies that
encourage private sector ingeneral ifwidespread success istobeachieved. Theapproach thatVanuatu
istaking recognizes thattheprivate sector isconsidered tobethebestqualified foridentifying and
capitalizing onnewopportunities.
TheprivatesectorinVanuatuishighlydiverse.Alargeruralsectorcontributesabout23percent
toGDP, while themodern offshore finance sector contributes about 7percent. Theshare ofindustry
inGDP grew from 8percentin1983 to22percentin1993. Manufacturing andconstruction have
beenthefastest growing industries inthegiven period.WT/ACC/VUT/2
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Between 1987 and1991 localcorporations increased innumber by86percentwhile exempt
corporations increased byonly25percent. Around 90percentofregistered corporations areforeign.
Ni-Vanuatu ownership ismuch higher (more than40percent)inthesmall industrial sector. Thenumber
oflicensed small business hasdecreased intherecent years inalltheruralareas, however, mostexisting
oneshavebeenintheretail activities andthetourism andservice sector.
Mostemployment (75percent)isinagriculture. Around twothirds oftheremaining workforce
isemployed intheformal private sector. Employment inthemanufacturing grew by45percentin
theperiod 1986-92, driven largely bygrowth of200percentinthewood processing industry and
strong growth inthefoodsector. These sectors nowprovide most employment andvalue added in
manufacturing. Themajority ofinvestment (80percent) hasbeenintheprivate sector. However
thelowproductivity ofthecapital stock isanotable feature.
InlinewiththeGovernments concerted efforts inpromoting anddeveloping privatization, the
Vanuatu Government hadsuccessfully privatized through amajor share ofdividends, bodies suchas
the:
- water supply
- electricity authority
- broadcasting andtelevision, and
- stevedoring
Thefundamental rationale behind suchresources istoreduce budgetary spends onservices
andalsoimprove levelofefficiency andmanagement.
With regard toprivate sector development andcoordination, theestablishment ofthe
Vanuatu Chamber ofCommerce andIndustry iscurrently being debated byParliament andwillsee
theeventual set-up oftheChamber thatwould actasacatalyst inaddressing keyprivate sector issues
andreforms through theGovernment.
2. Foreign trade
Foreign trade balance:
Theforeign trade balance for1993, thelatest statistical account, shows atrade balance of
Vt.7,283 million. Itincreases by10.8percentonprevious year, andanaverage growth rateof
7.4percentperannum (1986-1993).
Volume oftrade:
Thevolume forexport for1993, thelatest statistical account, shows 40,318 metric tons. It
increases by28.5percentonprevious year.
Export andimports:
Vanuatu exports mainly agricultural commodities, andimports mainly machines andtransport
equipment, manufactured goods, fuels, food, beverages, andtobacco.
Structure oftrade:
Thestructure ofVanuatu 'strade ischaracterized byalarge trade deficit thatisroughly offset
byasurplus onservices (most notably tourism receipts) andontransfers (aid).WT/ACC/VUT/2
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Trade bygeographic areas:
Vanuatu 'strading partners include: theEEC countries, Japan, Australia, South Korea,
NewCaledonia, NewZealand, Bangladesh, andPacific Island countries.
Dynamics oftrade:
Anewdevelopment wastheincreased production ofsquash pumpkins forexports from500tons
in1992 to1,500 tonsin1993. World prices forsquash were veryfavourable andincreased about
240percentin1993. Vanuatu earned Vt.129million from export ofsquash toJapan in1993.
Decentralization
Theestablishment ofthesix(6)regional provinces asoflate1994 wasinfactapolicy matter
bytheGovernment withaview toaccelerate andimprove theadministration andother important
processes intheprovinces inclose consultation withtheCentral Government. Atotalbudget of
Vt.100million isallocated fortheinitial set-up ofthesix(6)provinces.
Eachrespectiveprovincehavingautonomouspower,shallenactby-lawsandotheradministrative
matters pertaining tothetaxes, andother business andcommercial undertakings consistent tothelaws
oftheRepublic ofVanuatu.
Thespecific policies andregulations oftheprovinces arestilltobefinalized inconsultation
withtheGovernment andtheAttorney General 'sChamber, therefore, itisstilltooearly tomake any
further submission.
III. TRADE REGIME FOR GOODS
A. FOREIGN TRADE REGIME
1. Import regulation
(a) Evolution ofcustoms tariff regulation
Prior to1980, Vanuatu 'scustoms tariff regulations were more towards border controls and
asameans ofrevenue measure toalesser extent. Since then, Vanuatu 'stariff regulations arenow
directed almost wholly towards revenue collection.
Tariff regulations alsoattempt toencourage localimport substitution andasinallcases ina
customs environment, restrictions orprohibitions (e.g. onimportations ofdrugs, arms and
ammunition, etc...)areinplace toprotect thesociety.
Although Vanuatu isnotamember oftheCustoms Cooperation Council (CCC) or
World Customs Organization (WCO) thestandards setoutbytheCCC havebeenmore orlessadopted
byVanuatu.
(b) Customs tariff nomenclature
Whilst notamember oftheCCC, Vanuatu hasalways adopted thetariffnomenclature standards
assetoutbytheCCC.
Having based ournomenclature ontheCustoms Cooperation Council Nomenclature (CCCN),
Vanuatu continued toadjust itsnomenclature astheCCCN underwent changes.WT/ACC/VUT/2
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OnlJanuary1989,VanuatuadoptedtheHarmonizedCommodityDescriptionandCodingSystem
(theHarmonized System -HS)butwithabitofvariation.
Theadoption ofHSwithaslight variation hasnothowever, affected thestructure ofthe
original HS.
Forexample atthefourdigitlevelnochanges weremade butsome subdivisions atthesix-digit
levelhavebeenregrouped intothefour-digit levelwithout changing themeaning andtextatfour-digit
levels.
Forexample inChapter 2827 oftheHarmonized System ithasbeensubdivided asfollows:
2827.10
2827.20
2827.31
2827.32
2827.33
2827.34
2827.35 etc...
TheVanuatu customs tariffhasmaintained thesameheading butgrouped alltariffsubdivisions
sothatthewhole Chapter isnow2827.00.
Another example isinChapter 2828 atfourdigitlevel-andunder HSfurther subdivided to
2828.10 and2828.90 atsix-digit level.
Vanuatu customs hasadopted 2828 withnofurther subdivisions sothatatsix-digit levelitis
2828.00.
Vanuatu imposes ahighlevelofcustoms duties onimported products. Atpresent mostitems
areliable toavariable rateofdutyontheirvalue atimport.
Most imports aretaxed atanadvalorem basis withhigher specific (i.e.based onquantity or
volume) dutyratesonbeer, wines, spirits, tobacco products andhydrocarbon oils.
Inaddition tocustoms duty, most products areliable toa5percentservice taxpayable at
import onthedutyinclusive value.
Thetariff structure istowards arevenue purpose asitsfirstpriority. Secondly, tariff rates
mayreflect industry protection asameans tosupport import substitution ortheindustrial policy of
theVanuatu Government. Industry protection isachieved byhightariffs oncompeting imports.
There arefewprohibited orrestricted imports intoVanuatu.
Prohibitionsandrestrictionsthatareinplacearethoserelatingtoplantsandanimalsadministered
bytheQuarantine Department, restrictions ontheimportation offirearms andammunition, obscene
orindecent material, narcotics anddangerous drugs andmotor vehicles thatareright-hand drive.
Exemptions ofdutyorservice taxcanbeapplicable andthose exemptions arebased onthose
standards setoutintheInternational Convention ontheSimplification andHarmonization ofCustoms
Procedures.WT/ACC/VUT/2
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Thetariff structure perchapter isasfollows:
Chapter Average dutyrate Chapter Average dutyrate
1 0 10 40%
2 50% 11 23%
3 50% 12 0%
4 30% 13 17%
5 16% 14 17%
6 14% 15 30%
7 31% 16 51%
8 35%
9 45% 17 43%
18 31% 68 29%
19 46% 69 22%
20 55% 70 24%
21 52% 71 36%
22 Specific duties 72 22%
23 2% 73 22%
24 5334 Vt./kg. 74 22%
25 18% 75 17%
26 26% 76 20%
27 13Vt./litre 77 0%
28 16% 78 17%
29 17% 79 15%
30 0% 80 12%
31 0% 81 12%
32 30% 82 28%
33 14% 83 27%
34 34% 84 23%
35 17% 85 19%
36 22% 86 17%
37 12% 87 21%
38 15% 88 17%
39 26% 89 15%WT/ACC/VUT/2
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Chapter Average dutyrate Chapter Average dutyrate
40 16% 90 12%
41 20% 91 16%
42 18% 92 13%
43 14% 93 100%
44 25% 94 40%
45 17% 95 6%
46 27% 96 19%
47 17% 97 0%
48 24% 98 0%
49 8%
50 22%
51 22%
52 25%
53 22%
54 22%
55 21%
56 20%
57 47% Average dutyrates-24%
(plus 5%service tax)58 23%
59 24%
60 10%
61 31%
62 33%
63 33%
64 32%
65 35%
66 35%
67 27%WT/ACC/VUT/2
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Weighted average levelofduties onmain customs tariff groupings are:
Harmonized System section (Chapters) Average levelofduties
1 (1-5)
2 (6-14)
3 (15)
4 (16-24)
5 (25-27)
6 (28-38)
7 (39-40)
8 (41-43)
9 (44-46)
10 (47-49)
11 (50-63)
12 (64-67)
13 (68-70)
14 (71)
15 (72-83)
16 (84-85)
17 (86-89)
18 (90-92)
19 (93)
20 (94-96)
21 (97-99)29%
21%
30%
40%
18%
18%
21%
17%
23%
16%
25%
32%
25%
6%
19%
21%
18%
14%
100%
22%
0%
Average dutyrates24%
(plus 5%service tax)
(c) Import charges andfees
Inaddition tothedutyandservice tax,asalready indicated above, import charges areapplied
byportauthorities, stevedoring companies andtransit shedoperators.
Alsoanyone importing anycommodities forwholesale orretail areliable toanimport feeof
2percentofthec.i.f. value oftheirimports.
Inaddition tothis,fivecommodities, rice,sugar, flour, canned mackerel andtobacco products
cannot beimported byanyone unless theyhavebeenissued withalicence todoso.
Thelicensing feeispayable totheVanuatu Cooperative Federation attherateof3percent
to4percentofthec.if.value.
(d) Taxation regime
Abroad range oftaxes arelevied inVanuatu. Pursuant totheOECD based classification of
taxes, Vanuatu imposes thefollowing taxes.WT/ACC/VUT/2
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OECD taxclassification Vanuatu tax
1. Taxes onincome
111Withholding tax Renttax
121Withholding tax Renttax
132Interest withholding tax Business licence fees
2. Social security contributions
21Employees National Provident Fund contribution
22Employers National Provident Fund contribution
3. Employer 'spayroll tax
33Selective taxes Business licence fees
(industry specific)
4. Taxes onproperty
411Land taxes Land taxes
412Municipal taxes Municipal taxes
441Stamp duties Stamp duties
5. Taxes onprovision ofgoods andservice
5112 Sales (retail sales) Hotel andlicensed premises tax
5113 Turnover tax Business licence fees
Selective turnover tax Business licence fees
5121 Excise onpetroleum products
5123 Customs andimport duties
5124 Taxes onexports
5126 Taxes onpoker machine
Casino taxes
Race betting taxes
Taxes oninsurance
5211 Paidbyhousehold: Motor Vehicle
Vehicle registration feesandtaxes
Stamp duties onvehicle registration
Driver 'slicence
5212 Paidbyothers (e.g.companies): Motor Vehicle
Vehicle registration feesandtaxes
Stamp duties onvehicle registration
5213 Liquor licence
Mineral extraction related taxes
Departure tax
Logging licence
Fishing licence forcommercial fishing inEconomic ZoneWT/ACC/VUT/2
Page16
522Building construction permits
711Aviation charges
712Navigation andportcharges work permit fees
Residence permit fees
72Fines
Vanuatu alsooperates asataxhaven forinternational companies whoareregistered inVanuatu
butdonotcarry onbusiness locally except through financial institutions
(e) Tariff preferences
Vanuatu enjoys three multilateral tariff preferences infavour ofVanuatu andonemultilateral
tariff preference onareciprocal basis.
Themultilateral tariff preferences infavour ofVanuatu are:
- Generalized System ofPreferences (GSP);
- LOME Convention under theEuropean Union (EU) andAfrican, Caribbean and
Pacific States (ACP) arrangements.
Thisprovides forcertain products originating fromACPStates tobeadmitted intoEUcountries
atpreferential tariff rates.
South Pacific Regional Trade andEconomic Cooperation Agreement (SPARTECA) forcertain
goods originating fromVanuatu andother Pacific Island Countries tobeadmitted intoAustralia and
NewZealand atpreferential tariff rates.
AMelanesianSpearheadGroupTradeAgreementbetweenVanuatu,SolomonIslandsandPapua
NewGuinea provides forcertain goods originating fromthese countries tobetraded without payment
ofimport duty.
TheMelanesianSpearheadGroup(M.S.G)TradeAgreementwasactuallydeliberatedinameeting
ofthethree Prime Ministers ofPapua NewGuinea, Solomon Islands andVanuatu asfaras1988 in
PortMoresby. Theobjective andaimsoftheM.S.G. Trade Agreement wastofacilitate quick and
freeflowofgoods between allthree (3)states ondutyfreebasiswhich wasseenbytheM.S.G. States
asthemost practical approach toadopt indeveloping thiscommercial endeavour.
DuringtheratificationoftheM.S.G.TradeAgreementlastSeptember,itwasagreedinprinciple
thatinlightofitsimportance andpractical ability, theAgreement willcover initsinitial phase, three
(products) only, eachfrom respective M.S.G. States.
However, inthe1995meeting andasaresult ofitssuccess andgaining theauthorities concerned
hasexpanded theproduct coverage covering atotalof114tariff codes based ontheHarmonized
Commodity Description andCoding System.
Thecurrent M.S.G Trade Agreement listoftotalproducts isprovided foryourinformation.
Itmust benoted thatthedeliberations andundertakings under theAgreement areconsistent tothe
Article 24oftheGATT General Agreement onRegional International andapplies toMost-Favoured-
National (MFN) treatment.WT/ACC/VUT/2
Page17
MELANESIAN SPEARHEAD GROUP TRADE AGREEMENT
Products forInclusion inSchedule 1oftheTrade Agreement
Tariff code Description ofproduct Rateofduty
0208.90 Crocodile meat 0
0403.10 Yogurt 0
0406. Cheese andcurd 0
0409.00 Natural honey 0
0508 Shell money 0
0701 to0714 Edible vegetables andcertain roots and
tubers asclassified
within these tariff codes 0
0801 to0814 Edible fruits andnuts; peelofcitrus fruits
ormelons asclassified within these tariff
codes 0
0901 Coffee whether ornotroasted or
decaffeinated; coffee husks andskins;
coffee substitutes containing coffee inany
proportion 0
1106 Coconut milkpowder 0
1212.90 Kava 0
1604.50 Canned beef 0
1604.15 Canned mackerel 0
1905.10 to1905.40 Crispbread, gingerbread andthelike,sweet
biscuits; waffles andwafers, rusks, toasted
bread andsimilar toasted products and
other products intariff code1905 (but
excludes cabin biscuits) 0
2007 Jams, fruitjellies, marmalades, fruitornut
puree andfruitornutpastes, being cooked
preparations, whether ornotcontaining
added sugar orother sweetening matter 0
2105.00 Icecream (butexcludes other edible ice) 0
2301 to2309 Residues andwaste from thefood
industries; prepared animal fodder 0
2523.20 Portland cement 0
3402.20 Liquid bleaches putupforretail sales 0
3605.00 Matches 0
3923.20 Plastic shopping bags 0WT/ACC/VUT/2
Page18
Tariff code Description ofproduct Rateofduty
4401 to4421 Wood andarticles ofwood; wood
charcoal 0
4601 to4602 Manufactures ofstraw, ofesparto orof
other plaiting materials; basketware and
wickerwork 0
4818.10 Toilet paper 0
7317.00 Ironorsteelnails 0
8903.90 Fibreglass manufactured banana boats 0
9403.30 Wooden furniture ofakindusedinoffices 0
9403.40 Wooden furniture ofakindused
inthekitchen 0
9403.50 Wooden furniture ofakindused
inthebedroom 0
9403.60 Other wooden furniture 0
9403.80 Furniture ofcane, osier, bamboo orrattan. 0
(Tariff codes quoted atfour(4)digitorsix(6)levels arebased ontheHarmonized
Commodity Description andCoding System)
(f) Non-tariff measures, quotas andlicensing system
Allimport licences arenotobtained automatically.
Twotypes ofimport licensing systems areinforce -thatunder theBusiness Licence Actand
theother under theImport ofGoods Control Act.
Under theBusiness Licence Actanyone (natural persons orotherwise) require animport licence
where theimportation willresult inadirect wholesale orresale oftheimported products.
Thelicence toimport fordirect retail orwholesale isgranted bytheMinister ofFinance upon
application, andwillbeissued upon payment offees;valid foroneyear.
Suchlicences willnotbeissued tonon-citizens whohavenotcomplied withresidency permit
requirement.
Thelicence applies toimported goods originating from allcountries.
Thelicence requirement isforrevenue purposes andiscovered bytheBusiness Licence
Act[Cap. 183]. Thesystem canbeabolished bythelegislature.
Importation ofaprivate nature andimportation fortransformation orforuseinanybusiness
activity (other thanforresale) donotrequire anyimport permit.
Licence application mustbemade andapproved inadvance ofimportation. Itispossible for
licences tobeobtained within ashorter time-limit orforgoods arriving attheportwithout alicence.WT/ACC/VUT/2
Page19
Licences cannot begranted immediately onrequest.
Licensing yearisthecalendar yearandcanbemade anytime.
Under theImport ofGoods Control ActtheMinister forTrade, forthepurpose ofprotecting
andstimulating localindustry maybyorder either restrict orprohibit theimportation ofgoods into
Vanuatu orspecified parts thereof.
Thislicensing isintended torestrict thequantity ofimports. Thealternative tothiswould
betoimpose highdutyrates. Overthelastthreeyears Vanuatu hasinfactrepealed some oftheorders
andhascontinued tomaintain highimport dutyratesonaverylimited range ofgoods.
These licensing orders canberepealed without legislative approval. Information concerning
filing applications forlicences arepublished oncustoms publications ontheguide toimporting into
Vanuatu.
(g) Customs valuation
Customs valuation isbased ontheBrussels Definition ofValue.
(h) Rules oforigin
Vanuatu doesnothaveanyspecific legislation concerning "rules oforigin".
Trade preference agreements covers more orlessstandard rules oforigin, (nointernational
origin standards havebeenfinalized -nowbeing prepared byW.C.O)
(i) Customs formalities
Customs formalities arebased oninternational standards. Systems andprocedures arebased
ontheKyoto Convention ontheSimplification andHarmonization ofCustoms Procedures.
(j) Standards andcertification
Nostandard andcertification codeexists.
(k) Sanitary andphytosanitary measures
Quarantine regulations restrict, interalia,theimportation ofpoultry products, dairy products,
rootcrops, artifacts, plant material, meat, fruits, seeds, animals, arrival products, biological orany
related articles intoVanuatu.
Onthebasisofsource country risktheserestrictions mayinfactbeprohibitions. Some products
areprohibited.
2. Export regulations
(a) Customs tariff nomenclature
Customs tariff nomenclature isbased ontheHarmonized System.WT/ACC/VUT/2
Page20
Types ofduties arebothadvalorem andspecific withmostexport dutyrateat3percenton
f.o.b. value.
Specific duties areimposed onlogsortimber products.
(b) Export licensing system
Export Licence must beapplied forandarenotautomatic under theBusiness Licence Act.
Anyone exporting goods (ofVanuatu origin) onacommercial basiswhich hehasnotproduced, requires
abusiness licence.
Therequirement forthislicence isforrevenue purposes.
Personal exports orexports ofmanufactured products being exported bythemanufacturer do
notrequire anexport licence.
3. Export incentives
There arereally nospecial incentives granted forexport ingeneral. InfactVanuatu stillapply
export dutyat3percentonf.o.b.value which inprinciple discourages exports.
ProperlytheonlyexportincentivesatpresentarethoseunderInwardProcessingReliefStandards.
Butthese incentives onlyapplies tothemanufacturing sector. Theincentives basically exempts from
import duties andtaxes onimported rawmaterials temporarily imported formanufacture orprocess
andexport. Nodiversion tohome useofproducts except waste.
TheStandards cover almost anymaterials imported forthispurpose. Inordinary circumstances
thesame materials maybeimported subject toaverage dutyof24percentplus5percentservice tax.
4. Regulations oftrade intransit
There arenospecific regulations concerning trade intransit. However, trade intransit are
practised andareallowed under international customs practices.
B. OTHER POLICIES AFFECTING FOREIGN TRADE
(1) Industrial policy
Objectives fortheindustrial sector include:
Tomodify thestructure oftheindustrial economy, bywayofpromoting, developing and
strengtheningtheindustrialsectortowardstherealizationofself-propellinggrowthandeconomicbalance.
Thistobeachieved through industries capable ofearning andsaving foreign currency.
Toaccelerate thepaceofdevelopment oftheindustrial sector andsignificantly increase and
broaden therange ofmanufactured goods produced locally.
Toexploit totheoptimum economic leveltheagro-industrial linkages andpotential soasto
maximise domestic employment andvalue-added content indomestic production.WT/ACC/VUT/2
Page21
Toencourage anincrease inthelevelofindigenous participation andcontrol intheactivity
oftheindustrial sector.
Tocomplete thebuilding oftheindustrial infrastructure soastogenerate greater levels of
efficiency andimprove theeffectiveness oftheindustrial support systems andservices.
Toattract anddirect newinvestment intothose branches ofindustry orprojects thathave
Government policy.
Topromote aprogramme ofgraphical distribution ofnewindustrial andrelated services-type
activities through innovative measures soastoincrease rural employment andconditions.
Tostrengthen andexpand thebaseforsmall scale entrepreneurial development andrural
participation inthesectoral growth.
(2) Agricultural policy
Objectives fortheagricultural sector include:
Toencourage there-establishment ofastrong plantation sector withincreasing levels oflocal
participation inbothitsmanagement andownership.
Toencourage theparticipation ofprivate companies injoint-venture projects inwhich the
localization ofstaffwillbevigorously pursed.
Toexpand anddiversify export cropproduction.
Topromote anddevelop agriculture inallregions oftheRepublic.
Todiversify andincrease production, through applied research andmodern scientific practices,
while atthesame timepreserving andreactivating whatisvaluable intradition.
Toensure thebalanced utilization andconservation ofthenation 'snatural resources.
Asagainsttheagriculturalpolicy,theGovernmentwiththeviewofmaintainingpoliciesconsistent
withtheWorld Trade Organization principles isseriously contemplating onembarking onnewoutward
looking policies which willbedesigned toimprove export tradeandprovide astimulus forliberalization
andde-regulation toevery investment inallsectors oftheeconomy.
Inregard tothequestion raised astowhether subsidies ofanysortareprovided toanyindustries,
itmust benoted thatthere arevirtually nosubsidies intheforms ofgrants having monetary value
provided inthisregard, however special incentives areoffered bytheGovernment through theBusiness
Licence Committee andtheCustoms Department toassist agricultural producers andsmall holders
intheircommercial endeavours.
Thisspecifically includes interalia,thefollowing:
(a) Sellers andproducers ofagricultural products areexempt fromhaving business licence;WT/ACC/VUT/2
Page22
(b) commercial banks provide special loans toinvestors intheagriculture andindustrial
sectors with relatively lower interests rates;
(c) special exemptions areaccorded toagricultural andindustrial projects having special
magnitudes bythecustoms andtaxes authorities;
(d) arrangements aredoneaccording toaMemorandum ofUnderstanding (MOU) signed
betweentheDepartmentofIndustries,theDevelopmentBankofVanuatutoassistspecial
mid-term agricultural andindustrial projects.
(3) Financial, budgetary andfiscal policy
Vanuatu 'sfiscal accounts havecome under moderate strain sincethemid-1980s duetodeclining
grant aidforbudgetary assistance andlimited success incontributing expenditures. After recording
alarge deficit in1989when anewaircraft waspurchased forthenational airline, overall deficits have
averaged some 8.5percentofGDP, andamoderate narrowing isbudgeted for1992.
Prior totherecent cyclical slowdown, thereview yield oftheVanuatu taxsystem hadbeen
onarising trend relative toGNP. Underlying thistrend aresignificant steps bytheGovernment to
broaden thetaxbaseaway fromitstraditional, narrow dependence upon-taxesoninternational trade.
Non-tax revenues haveremained roughly unchanged relative toGDP, asmarkedly higher collections
fromfinesandfeeswerefullyoffset bylower receipts frompublic enterprises following privatization
ofthetelephone company (seetablebelow).
Despite thephase-out ofbudgetary grants inthemid-1980s foreign grants surged towards the
endofthedecade before levelling offinmore recent years.
Consequently, bytheturnofthedecade, thecomposition offoreign grants hadundergone a
major change -namely, budgetary assistance hadbeeneliminated, development grants hadincreased
substantially, andthere were sporadic disbursements ofstabex funds.
Nevertheless, theircontribution tototalrevenues wasroughly unchanged fromfiveyearsearlier.
Tables 3:Summary ofVanuatu Fiscal Operations, (1986-92)
(inpercentofGDP)
1986 1987 1988 1989 1990 1991 1992
Perlim Budget
Total budget
andgrant 43.1 62.0 50.8 48.2 44.1 42.8 41.4
Tax-revenue 18.4 21.4 21.0 20.7 21.6 18.4 18.4
Non-tax revenue 5.5 4.7 5.0 5.0 4.9 5.3 5.5
Foreign grants 19.2 35.9 24.7 22.6 17.6 19.1 17.5
Total expenditure 49.1 58.1 55.3 58.4 54.1 50.3 45.8
Current 38.8 36.1 34.8 31.4 35.1 28.7 27.6
Capital 10.3 21.9 20.6 27.0 19.1 21.6 18.2
Overall balance -6.0 4.0 -4.5 -10.0 10.0 -7.5 -4.4WT/ACC/VUT/2
Page23
Ontheexpenditure sideofthefiscal accounts, current spending hasbeenonadeclining trend
relative toGDP since themid-1980s, partly reflecting theefforts tocontain thewages andsalary bill,
which hasdeclined inrelation toGDP. Spending ontheother goods andservices hasalsobeenwell
contained andgeneral transfers havefallen sharply overtheyears. Transfer forcopra subsidies have
beensizable atinfrequent intervals, butinterest payments haveincreased inamajor way,albeit from
averysmall base.
Capital spending inVanuatu depends inlarge partupon theavailability offoreign assistance
andtoalesser extent, upon surplus oncurrent account, which have averaged approximately
Vt.400million (orsome 10percentofcapital spending) inthepastfewyears.
Asroughly estimated inthegiven tableanalysis, capital expenditures rosesteeply inrelation
toGDP inthesecond halfofthe1980s reaching apeak(approaching 30percentofGDP) in1989
when, asnoted earlier anewaircraft waspurchased forthenational airline. Since then,capital spending
hasfluctuated around 20percentofGDP compared withhalfthatamount earlier inthedecade.
(4) Foreign exchange andpayments system, relations withinternational Monetary Fund, and
application offoreign exchange controls
Thecurrency ofVanuatu isthevatu, theexternal value ofwhich isdetermined onthebasis
ofatransactions-weighted (trade andtourism receipts) basket ofcurrencies ofitsmajor trading partners.
TheReserve Bank ofVanuatu buysandsellsforeign exchange daily, andbuying andselling ofthe
vatuagainst thecurrencies inthebasket arequoted twice adaywithin margins ranging between
0.25percentand0.30percentaround themiddle rate. TheReserve Bank deals inUSdollars on
aspotbasis andbuys andsellsforeign exchange onlyintransactions withcommercial banks, the
Government andVCMB 'saccounts. There arenotaxes orsubsidies onpurchases orsalesofforeign
exchange.
Prescription ofcurrency
There isnoprescription forpayment ofcurrency requirements.
Non-resident accounts
Nodistinction ismade between theaccounts ofresidents andnon-residents. Debits andcredits
toallaccounts maybemade freely.
Payments forinvisible
There arenorestrictions onpayments forinvisibles.
Proceeds forinvisible
Exchange proceeds from invisibles neednotbesurrendered.
Capital
Allinward andoutward movements ofcapital areunrestricted.WT/ACC/VUT/2
Page24
Relationship ofVanuatu withIMF
Vanuatu became amember oftheIMFon28September 1981. Vanuatu formally accepted
theobligations ofArticle VIII,Sections 2,3and4oftheFund Agreements asfrom1December 1982.
TheIMFholds regular annual Article IVConsultation discussion withVanuatu. There are
nostructural adjustment oranyother typeofagreements withtheIMF. TheIMFprovides technical
assistance intheformofexpert working intheReserve BankofVanuatu. TheIMFhasvarious accounts
withtheReserve Bank which alsoactsasitsagent.
Relationship ofVanuatu withtheWorld Bank
Vanuatu joined theWorld Bank group on28September 1981. Vanuatu hasbeenborrowing
small amounts from theIDAforeducation, andother multi-projects.
TheWorld Bank covers Vanuatu initsreports dealing withtheregion andregular contact is
being maintained, inthefirstinstance through theMinistry ofFinance.
Vanuatu attends allannual Board ofGovernors meetings ofboththeIMFandtheWorld Bank.
(5) Foreign anddomestic investment policy
Allinvestment inVanuatu isguided byageneral policy ofwhich itscornerstone isanopen
house. While thisissotheGovernment willencourage andpromote certain foreign investment more
thanothersbutnotnecessarilyputtinganyrestrictionsonthetypesofinvestmentsthatarenotparticularly
encouraged. Theinvestments which areespecially encouraged willinclude those which promote:
(i)human resources development; (ii)economic growth; (iii)infrastructure development;
(iv)self-sufficiency; and(v)improve quality oflife.
Small-scale businesses which could perfectly becarried outbynationals whomight nothave
many opportunities ifthefieldwere opened upareexcluded from foreign nationals.
Suchbusinesses aredeclared wellinadvance soastoavoid thepossibility ofarbitrary decisions
targeted atparticular investors andsuchlimitations willnotapply toexisting businesses.
(6) Government procurement
Chapter 22,Regulation 361and368,oftheFinancial Regulations oftheRepublic ofVanuatu
provides theguideline forgovernment procurement.
Procurement procedures
1. Where thecostofaspecific work orservices doesnotexceed Vt.50,000 atleasttwo(2)
quotations shallbeobtained, wherever possible, andtheprocurement order willbeplaced byasenior
department staff.
2. Where thecostofaspecific work orservice exceeds Vt.50,000 butdoes notexceed
Vt.1million, atleast three (3)written quotations shall beobtained wherever possible andthe
procurement order willbeplaced bytheAccounting Office whowillusually bethedirector ofthe
department.WT/ACC/VUT/2
Page25
3. Where thecostofspecific work orservice exceeds Vt.1million, atleastthree (3)written
tendersmustbeobtained.ThesetendersmustbesubmittedtotheCentralTenderBoardforitsevaluation
andfortheawarding ofthecontract.
Theguideline further provides thattheprocurement ofgoods andservices shallbemade through
theGovernment Central Store wherever possible. Purchase fromprivate suppliers shallbemade only
iftheGovernment store cannot supply theitems orservices required. Procurement procedures may
bevaried bytheMinister ofFinance insuchcircumstances ashedeems necessary.
Tender
Tenders arecalled byopencompetitive bidding andaresubmitted insealed envelopes tothe
Secretary oftheCentral Tender Board intheDepartment ofFinance. Upon receipt ofthetenders,
stillsealed, these aredated, signed andplaced inalocked boxintheDepartment ofFinance. The
names ofthetenderers arenotdivulged toanyone prior totheopening ofthetenders.
Notice ofinvitation totender
Notice ofinvitation totender isgiven atleasttwoweeks before theclosing date. Thenotice
ismade aspublic aspossible bymethods deemed appropriate. Persons enquiring about details ofthe
work aregiven sufficient information concerning thecontract andprocedures, andastatement the
Government isnotbound toaccept thelowest orhighest oranytender.
Membership ofTender Board
TheCentral Tender Board consists oftheDirector oftheDepartment which isprocuring the
goods orservices, theDirector General ofFinance, ortheirrepresentatives andarepresentative of
theMinistry responsible forthedepartment which isprocuring thegoods orservices.
Aminimum oftwo(2)oftheabove persons isnecessary toconstitute ameeting oftheCentral
Tender Board. TheBoard mayco-opt anyGovernment officer toassist inreaching adecision. The
Board hasaSecretary andistherepresentative oftheDepartment ofFinance. Thesecretary keeps
detailed minutes oftheBoard Meetings. Intheevent thatamember oftheBoard stands togain
financially orotherwise inletting ofacontract, theconcerned member willnotbeamember ofthe
Board considering thiscontract.
Opening oftenders
Thetenders areopened byaTender Board convened forsuchpurpose. Eachtender isnumbered
asitisopened, readouttotheBoard andlisted inorder. Thelistwillshow thenumber ofthetender,
name oftenderer; amount oftender; andanyspecial conditions ofbid.Thelistissigned bytheTender
Board Members. Anymember oftheBoard mayinspect thetender envelopes prior totheirbeing
opened. Latetenders arereturned unopened tothetenderer andarenotconsidered.
Consideration oftenders
After thetenders havebeenopened anappropriate technical officer willsubmit areport on
eachtender withhis/her recommendations foracceptance. Thereport willadvise theBoard onthe
details ofeachtender. Theform ofallwritten contracts overVt.3million havetheapproval ofthe
Attorney General before thecontract issigned. Thetermofcontract makes itclearthatthecontract
cannot beassigned orsublet without theconsent oftheGovernment.WT/ACC/VUT/2
Page26
Award oftenders
Upon thereceipt ofthetechnical officer 'sreport, theBoard reconvene andaccept thelowest,
evaluated tender. Ifthisisnotdone, anexplanation ofthereasons whythisdidnothappen isgiven
andrecorded.
Approval ofvariations
Inthecaseofacontract forthesupply ofworks orservices theAccounting Officer mayauthorize
variations notexceeding 20percentoftheoriginal contract sum. Variations inexcess of20percent
must havetheprior approval oftheMinister ofFinance.
(7) State-trading enterprises
There are10governmental enterprises and15non-governmental enterprises inwhich the
Government isalsoashareholder. Most ofthese enterprises conduct transactions ininternational
markets. Thepurpose ofthosegovernmental enterprises istostabilize supply andprices ofrawmaterials
orindustrial inputs, inparticular theVanuatu Commodities Marketing Board (VCMB) which is
responsible forthepurchase, saleandtheprice stabilization paidforprescribed commodities.
Some oftheseenterprises enjoy amonopoly position orhavetheexclusive righttoimport certain
products andrawmaterials.
TheGovernment, based onefficiency considerations, hadprivatized fewofitsbasicenterprises
likeWater Supply, andTelecom Vanuatu.
Government enterprises areencouraged tomake purchases orsalessolely inaccordance with
commercial considerations.
(8) Free-trade zones
TheVanuatu Government 'sCouncil ofMinisters hason21September 1993 given approval
fortheestablishment offreeindustrial zones onseveral islands oftheRepublic including Santo, Efate,
Malekula andTanna. Todatethezones arenotimplemented. UNIDO hascompleted astudy onthe
economics oftheproject. Further study covering thelogistics oftheprojects isstillrequired.
(9) Subsidy policy
According totheVanuatu Commodities Marketing Board (VCMB) Acttheboard isrequired
toconduct itsaffairs soastoavoid theneedtorelyongovernment grants orsubsidies. TheVCMB
wasestablished in1981 tobuy,sellandstabilise theprices paidforprescribed commodities (copra,
cocoa, andkava). However, theVCMB hadincurred operating losses inevery yearsince 1984, due
mainly toadrop intheworld prices ofcopra andcocoa, withaccumulated losses approaching
US$20 million. Aggregate subsidy attheendof1992 amount toanannual subsidy ofabout US$2.5
million oraround Vt.300million.
(10) Freeeconomic zones
TheVanuatu Government 'sCouncil ofMinisters hason21September 1993 given approval
fortheestablishment offreeindustrial zones. There hasnotbeenanyapproval forafreeeconomic
zoneassuch. Todatetheindustrial zones havenotbeenestablished. UNIDO hascompleted afeasibility
study oftheproject. Further study isstillrequired todetermine whether ornottheproject isfeasible.WT/ACC/VUT/2
Page27
(11) Preferential trade agreements orother special trade arrangements andagreements
Vanuatubenefittedfromseveralpreferentialtradeagreementswhichconveyduty-freeorlow-duty
rateaccess forexports intothemarkets ofthemajor industrial countries.
Vanuatu received "generalized system ofpreference" (GSP) treatment which accords herthe
lowest duties onoffer forproducts exported toOECD nations.
Vanuatu isasignatory totheLomé Convention which, inaddition todevelopment assistance,
provides forduty-free access formost products toEuropean markets. Under theLomé Agreement
Vanuatu isalsoeligible forcompensatory financing inresponse toasecular decline ininternational
trading conditions.
Preferential market access exists between Pacific Forum Island Countries andAustralia and
New Zealand under theSouth Pacific Regional Trade andEconomic Cooperation Agreement,
(SPARTECA), towhich Vanuatu isabeneficiary. Thisprovides manufacturers theopportunity toenter
newmarkets under theshelter ofanother nation 'strade protection butthere areserious hidden costs
associated withlanguishing under another country 'strade protection.
Under theumbrella oftheMelanesian Spearhead Group (MSG), atrade agreement was
established between Papua NewGuinea, Solomon Islands andVanuatu totrade freely beefandbeef
products, teaandcanned tuna. Withthetradeagreement Vanuatu exports freely beefandbeefproducts
intoPNG andSolomon Islands, Solomon Islands exports freely canned tunaintoPapua NewGuinea
andVanuatu, andPapua NewGuinea exports freely teaintoSolomon Islands andVanuatu.
C. VANUATU INSTITUTIONAL BASE FOR TRADE AND ECONOMIC RELATIONS
WITH THIRD WORLD COUNTRIES
1. (i) Bilateral trade, Economic Integration/Free-Trade Agreement, Bilateral andPlurilateral
Mutual Recognition andother Sectorial Agreement andEconomic Agreement
SofarVanuatu hasestablished aTechnical AidCooperation Agreement made between the
Vanuatu Government andNewCaledonia. Special attention wasalsogiven intheareas ofyouth and
sports development inVanuatu whereby NewCaledonia isprepared toassist Vanuatu upon request.
TheVanuatuGovernmentemphasizestheimportanceoftechnicalandmutualcooperationbetween
thetwocountries andtoformulate them according totheneeds andrequirements which areinline
withtheterms andconditions ofthesaidagreement.
TheBilateral Trade Agreement between FijiandVanuatu isyettobefinalized.
(ii) Economic Integration/Free Trade Agreement: TheMSG Trade Agreement isaFree
Trade Agreement which hasbeenratified byPapua NewGuinea, Solomon Islands and
Vanuatu.
(iii) Bilateral andPlurilateral Mutual Recognition andother Sectorial Agreement.
Itisworth noting thattheGovernment ofVanuatu hassigned theAirServices Agreement with
theGovernment oftheRepublic ofFijion10August 1993 inNauru andalsowiththeGovernment
ofAustralia on15June1993 inPortVila.WT/ACC/VUT/2
Page28
TheAgreement concerning thetechnical cooperation between theGovernment ofthe
Republic ofFijiandVanuatu wassigned inNauru on10August 1993.
TheTechnical Cooperation Agreement between theGovernment ofPapua NewGuinea and
Vanuatu wassigned on4May1994.
(iv) Economic agreement
TheGovernment ofVanuatu hassigned theAgreement onEconomic andTechnical Cooperation
between theGovernments ofPeoples Republic ofChina andVanuatu on25September 1992inPortVila.
2. (i) Membership ofMultilateral Agreements andArrangements
Vanuatu isaparty totheSouth Pacific Regional Trade andEconomic Cooperation Agreement
(SPARTECA) under theForum Secretariat andalsowithPacific Islands Association ofChamber of
Commerce (PIACC). TheMSG Trade Agreement canalsobeclassified asamultilateral agreement.
Vanuatu isrepresented bytheForum Secretarial atAPEC andPECC onobserver capacity.
C. SERVICES REGIME
1. Market structure
(a) Contribution toGDP oftheservices sector andofspecific services subsectors
Services contribute some 65-70 percenttoVanuatu 'sGDP ofwhich tourism isestimated to
be18percentandFinance Centre activities around 10percent. Transport andcommunications accounts
foraround 8percentofGDP whilst government isnearly 13percent. Agriculture contributes just
under 20percentwithindustry providing some 13percent. Trade asawhole isestimated tobejust
over32percentofGDP.
(b) Percentage share ofemployment -services sector andspecific subsectors
Itisnotpossible toacquire dataonemployment inservices asawhole since thelastlabour
market survey wasconducted in1989.
However, dataonemployment intourism indicates approximately 1,400 full-time employees
from theVanuatu Tourism Master PlanEstablishment Survey.
(c-f) There seem tobenodatacollated onthese issues. Withregard totourism however, Australia
generates 52percentofallarrivals followed byNewZealand at14percent andother Pacific countries
account for19percent. Europe generates 5percentandNorth America 3percent. There seem
tobealsonodataregarding extent offoreign investment intourism orforeign labour content.
TelecomVanuatuLimitedisthesolesupplierofcommunicationservices.Thecompanyconsists
ofCable andWireless ofUKandCIDAlcatell inParis andtheVanuatu Government. TheVanuatu
Government holds a33.3percentshare intheform ofissued capital inthecompany.
Electricity andwater services areprovided bytheUnion Electrique duVanuatu Limited, a
French Company. TheVanuatu Government holds amere 10.5percentshare intheform ofissued
capital inthecompany.WT/ACC/VUT/2
Page29
While thedomestic airservices market ismetsolely bytheVanair theinternational market
isshared between AirVanuatu Limited, Solomon Airline, AirPacific, andAirCaledonie. TheVanuatu
Government holds 100percentshares inAirVanuatu Limited andVanair Limited.
Ports andmarine services areprovided bytheIfiraWharf andStevedoring Limited andthe
Santo Stevedoring Limited. TheVanuatu Government holds 15percentshares intheIfiraStevedoring
Limited withtheremaining shares heldbythecompany itself, (locally owned company). TheSanto
Stevedoring Limited isowned bysome provincial governments andtheSanto Stevedoring Limited,
alocally owned company.
2. Policy orientation
(a-d) TheThird National Development Plan1992-96 (DP3) doesnotspecify policy onservices in
general. ForthefirsttimeinDP3, thetourism sector hasbeenafforded aspecific chapter inwhich
development objectives andstrategies areoutlined. TheGovernment ofVanuatu hasstated inDP3
thatit'spolicy forthetourism sector isto:
"Developmentofpositivetourismimageabroadandstriveforastablenumberoftourists
andtourism infrastructure thatiscompatible withtheenvironment andVanuatu cultures, which
attract tourists toVanuatu inthefirstplace." and
"Provide anattractive investment climate foroverseas investors thatiscompatible with
providing tangible economic benefits toVanuatu andthuscontributes tothecountry 'ssocial
andeconomic development."
TheGovernment hasspecified thefollowing objectives forthetourism sector during theDP3
period:
- formulation ofaDevelopment Master Planforthesector (currently being finalized);
- expansion oftourism infrastructure;
- promotion ofgreater Ni-Vanuatu participation inthesector;
- introduce measures toallow theNational Tourism Office andAirVanuatu tofunction
more effectively;
- Diversify thetourism markets; and
- generate greater community awareness oftourism andtheopportunity itaffords for
employment andentrepreneurship.
Theonlyother service sector tomerit itsownchapter wastheFinance Centre forwhich the
Government 'sstated policy isto:
"Introducemeasurestoincreaseinvestorconfidenceandsecurityallowingforlonger-term
investment. Establish amore harmonious partnership between public andprivate sectors, with
theaimofgiving proper direction totheindustry forVanuatu tobecome thefinancial centre
oftheSouth Pacific."WT/ACC/VUT/2
Page30
Specific objectives fortheFinance Centre are:
- Make Vanuatu theFinancial Centre oftheSouth Pacific byincreasing thestability,
security andcompetitiveness ofitsinvestment climate;
- reduce thehighdiscrepancy between lending andsavings rates; and
- continue tostrengthen theDevelopment Bank ofVanuatu, considering theimportant
pivotal roleitisplaying andwillcontinue toplayasafinancial institution serving the
business needs ofNi-Vanuatu during theDP3period.
I. REGULATORY FRAMEWORK
For1(a)-(c) and2(a)refertocopies oftherelevant chapters oftheLaws oftheRepublic of
Vanuatu of1988already submitted. (N.B. Asummary including revisions isbeing prepared andwill
besubmitted induecourse.)
(b) Consumption abroad
There arenoprohibitions ontheconsumption ofservices abroad bynationals.
There arenolimitations applied toconsumption ofservices abroad bynationals relating to
ceilings onforeign exchange fortravel abroad.
Anairport departure taxisapplicable fortravelling abroad (US$17) byair.
Noexitvisaisapplicablebutentryvisamayberequiredbynationalstravellingtosomecountries.
(c) Commercial presence
Thesupply ofservice through thepresence ofajuridical person, branch orrepresentative office
ofthesupplying country intheterritory ofVanuatu islargely unrestricted.
There arenoprohibitions ontheestablishment offoreign service suppliers.
Theonlyconditions arethattheycomply withVanuatu 'srequirement andthattheyalsocomply
withtheirownlegislation inthecountry where theywereincorporated. Inaddition theymusthave
agood standing withtheirownregulatory body.
Vanuatudoesapplysomelimitationsonthenumberofservicesuppliersestablishedinthemarket
interms ofexclusive service suppliers ormonopolies intelecommunications, electricity supply and
internal airtransport services.
Limitations relating toservice suppliers interms ofnumerical quota ortherequirement ofan
economic needs testarenotapplicable.
Otherthanthosemonopoliesorexclusiveserviceappliesindicatedabove,therearenolimitations
relating tospecific types oflegalentity orjointventure through which aservice supplier maysupply
aservice.
There isnolimitation ontheforeign participation offoreign capital interms ofmaximum
percentage limitonforeign shareholding orthetotalvalue ofindividual oraggregate foreign investment.WT/ACC/VUT/2
Page31
There arenodiscriminatory forms ofperformance requirements, investment incentives, tax
measures, prudential measures andnotechnology transfer requirements.
(d) Presence ofnatural persons
There arenolegal limitations onthenumber ofnatural persons thatmaybeemployed ina
particular service sector intheform ofnumerical quotas. TheLabour Commissioner would require
thatthepostbeadvertised andthatthere isaclear indication thatnoNi-Vanuatu skilled person is
available orcanfillthispost. Theclear indication onsuitably skilled persons isdetermined bythe
Labour Commissioner based onVanuatu Government guidelines.
Intracorporate transferees would beconsidered ontheabove basis.
With regard toother points supplying service e.g.asabusiness visitor, theImmigration and
Labour Department mayallow residence andwork permit -residence permit foronemonth witha
maximum period offourmonths andwork permit exemption.
Thework permit exemption granted bytheLabour Commissioner maybeforaperiod oftwo
weeks andsubject tonoincome being received through localsources during theirstayinthecountry.
There arenorestrictions onanynationality inorder toobtain alicence topractice aprofession.
Residence permit requirements forobtaining alicence topractice aprofession doesnotapply -a
minimum ofaUS$50,000 invested inVanuatu (inwhatever form) doesentitle anyforeign natural person
aresidence permit of12months. Ahigher investment entitles amuch longer residence permit period.
Legalpractitionersarerequiredtoholdprofessionalqualification-adegree,diplomaorcertificate
inlawfrom atertiary institution andrequire theapproval oftheLegal Practitioners Board before
practising thisprofession.
Medical anddental practitioners, optometrists, chiropractors andosteopaths must have a
professional qualification, adegree, diploma orcertificate inmedicine, surgery, dentistry, optometry,
chiropractory orosteopathy from atertiary institution -andrequire theapproval oftheMedical
Practitioners Board before practising these professions.
Accounting practitioners musthaveprofessional qualification either byholding aqualification
ofoneofthemember accountancy bodies oftheInternational Federation ofAccountants orholding
adegree, diploma orcertificate inaccountancy from atertiary institution.
Engineering andarchitectural practitioners, surveyors anddraftsmen mustholdprofessional
qualification byholding adegree, diploma orcertificate inengineering, architecture andtherespective
discipline. Inthecaseofsurveyors, priorapproval fromtheSurvey Board isrequired before anysurvey
activity iscarried out.
There arenolanguage proficiency requirements toobtain alicence: butdonotethattheofficial
languages areEnglish andFrench withBislama thenational language.
Therearenofurtherlocaleducationrequirementsforobtainingalicencetopractiseorprofession.
Recognition ofeducation orexperience obtained, orcertification granted inother countries
areaccorded autonomously.WT/ACC/VUT/2
Page32
Inaddition should noNi-Vanuatu skilled person beavailable itisagovernment requirement
thatjobtraining must beprovided.
There isunfortunately thelackoftransparency ofmethodology ofapproval orrefusal.WT/ACC/VUT/2
Page33
REPUBLIC OFVANUATU
DECENTRALIZATION AND LOCAL GOVERNMENT REGIONS
ACT NO.1OF1994
Arrangement ofSections
PART I
DEFINITION
1. Legal Authorities.
2. Institutions.
PART II
CREATION OFLOCAL GOVERNMENT REGIONS
3. Establishment ofLocal Government Regions.
4. Establishment ofLocal Government Councils.
PART III
COMPOSITION, NAME AND DUTIES OFLOCAL GOVERNMENT COUNCILS
5. Composition ofLocal Government Councils.
6. Election ofmembers oftheLocal Government Councils.
7. Appointment ofMembers oftheLocal Government Councils.
8. Conduct ofbusiness.
9. Procedure forenacting by-laws.
10. Standing orders.
11. Setting upofacommittee.
12. Voting andquorum.
13. NewElection. Dissolution ofLocal Government Councils anddelegation ofresponsibility.
14. Dissolution ofLocal Government Councils andelection foranewassembly.
15. Approved by-laws.
16. Publication andCommencement ofby-laws.
17. Supreme Court toassess thelegality ofby-laws.
18. Procedure onreceipt ofby-laws bytheMinister.
PART IV
THE LOCAL GOVERNMENT REGION EXECUTIVE OFFICER
19. Local Government Executive Officer torepresent Minister.WT/ACC/VUT/2
Page34
PART V
POWERS OFTHE LOCAL GOVERNMENT COUNCILS TOMAKE BY-LAWS
20. Power tomake by-laws.
21. Power tomake by-laws fixing ratesandtaxes forissue oflicences.
22. Power tomake by-laws specifying ratesandtaxes forlocalpurposes.
PART VI
ALLOWANCES
23. Allowances tomembers.
24. Payment ofgratuities.
PART VII
FUNDING OFLOCAL GOVERNMENT COUNCILS
25. Revenue.
26. Determination ofAdministration subsidy.
27. Grants forMaterial Supplies.
28. Loans.
PART VIII
LOCAL GOVERNMENT COUNCIL BUDGET
29. Preparation andapproval ofbudget.
30. Council toapprove truebalanced budget.
31. Failure toapprove budget.
PART IX
MISCELLANEOUS AND TRANSITIONAL PROVISIONS
32. Election andappointment ofmembers.
33. Department ofLocal Government toassist andadvise theMinister.
34. Provisions nottobeapplicable within municipalities andtheirboundaries.
35. Regulations made bytheMinister.
36. Repeal andsavings.
37. Commencement.WT/ACC/VUT/2
Page35
REPUBLIC OFVANUATU
Assent: 13/06/94
Commencement: 11/07/94
DECENTRALIZATION AND LOCAL GOVERNMENT REGIONS
ACT NO.1 OF1994
AnActtomake provisions forthedecentralization andestablishment ofLocal Government Regions
andformatters connected therewith:
BEITENACTED bythePresident andParliament asfollows:
PART I
DEFINITIONS
LEGAL AUTHORITIES
1. Inaccordance withthisAct:
- ThetermConstitution means thecurrent Constitution oftheRepublic ofVanuatu.
Itisthesupreme legalinstrument.
- thetermActmeans anactapproved byParliament incompliance withtheprocedures
provided forintheConstitution.
- thetermby-law means aby-law approved bytheCouncil ofeachLocal Government
Region. Theby-law shall besubordinate totheConstitution andtoanActof
Parliament. Aby-law contradicting theessence ofanActortheConstitution shall
beruled nullandvoid. Thevalidity orotherwise ofaby-law shallbedetermined by
theSupreme Court.
INSTITUTIONS
2. Inaccordance withthisAct:
- ThetermLocal Government Council means thebodyofrepresentatives ofeachLocal
Government Region.
- thetermLocal Government Region means theterritorial community being aunitof
decentralization.TheLocalGovernmentRegionsshallbelegalentitiesandshallpossess
theirownfields ofjurisdiction which shallpermit itsagencies tofreely runtheiraffairs
under thecontrol oftheGovernment andthejudicial authority andincompliance with
theConstitution andlawsoftheRepublic ofVanuatu.
- thetermLocal Government Region Executive Officer means therepresentative ofthe
Government oftheRepublic ofVanuatu appointed bytheMinister.WT/ACC/VUT/2
Page36
- theterm Minister means theminister responsible forallmatters relating tothe
decentralization.
PART II
CREATION OFLOCAL GOVERNMENT REGIONS
ESTABLISHMENT OFLOCAL GOVERNMENT REGIONS
3. (1) ThePrime Minister maybyOrder:
(a) declare aLocal Government Region;
(b) giveaname toaLocal Government Region;
(c) define theboundaries ofaLocal Government Region andalterthem.
(2) Thenumber ofLocal Government Regions tobesodeclared under subsection (1)shall
notbelessthan4andnotmore than6.
ESTABLISHMENT OFLOCAL GOVERNMENT COUNCILS
4. When thePrime Minister declares aLocal Government Region under section 3(1),heshall
intheOrder establish aLocal Government Council forthatRegion.
PART III
COMPOSITION, NAME AND DUTIES OFLOCAL GOVERNMENT COUNCILS
COMPOSITION OFLOCAL GOVERNMENT COUNCILS
5. EachLocalGovernmentCouncilshallbecomposedofelectedmembersandappointedmembers.
ELECTION OFMEMBERS OFTHE LOCAL GOVERNMENT COUNCILS
6. (1) Election ofthemembers oftheLocal Government Council shallbeonthebasis of
direct universal franchise which shallinclude anelement ofproportional representation.
(2) Thenumber ofelected members ineachLocal Government Region shallbesuchthat
eachmember shallrepresent notlessthanapopulation of1,500 people inthatRegion.
(3) Thetermofoffice oftheelected members shallbeforaperiod offouryears. They
shallbeeligible forre-election.
(4) Theterritory ofeach Local Government Region may bedivided intoseveral
constituencies byanorder signed bytheMinister.
APPOINTMENT OFMEMBERS OFTHE LOCAL GOVERNMENT COUNCILS
7. (1) TheMinister maybyOrder provide forappointed members ofeachLocal Government
Council inrespect ofitsLocal Government Region andsuchmembers shallconsist
of:WT/ACC/VUT/2
Page37
(a) Chiefs appointed bytheMinister from among persons nominated by
representative bodies ofchiefs;
(b) women appointed bytheMinister from among persons nominated by
representative bodies ofwomen;
(c) youthrepresentativesappointedbytheMinisterfromamongpersonsnominated
byrepresentative bodies ofyouth;
(d) church representatives appointed bytheMinister from among persons
nominated byrepresentative bodies ofchurches.
(2) Theappointed members:
(a) shall hold office foraperiod offour years andshall beeligible for
reappointment; and
(b) shallbeconsulted onanymatter, question orissue coming before theLocal
Government Council foritsdecision.
(3) Theappointed members shall notbeentitled tovoteatthemeetings oftheLocal
Government Councils.
(4) Theappointed members shallnotbemore thanhalfthenumber ofelected members.
CONDUCT OFBUSINESS
8. (1) TheLocal Government Council shallholditsmeetings inpublic attheHeadquarters
oftheLocal Government Region. TheHeadquarters shallbedesignated through an
order tobeissued bytheMinister upontherecommendation oftheLocal Government
Council.
(2) TheLocal Government Council shallholdtwoordinary meetings during onecalendar
year. Thefirstordinary meeting, being thebudgetary meeting, shallcommence on
thefirstworking dayinthemonth ofNovember andmaylastforaperiod notexceeding
45days.
(3) Thesecond ordinary meeting, being theadministrative meeting, shallcommence on
thefirstworking dayinthemonth ofMayandmaylastforaperiod notexceeding
60days.
(4) Apart from suchmeetings, theLocal Government Council mayholdextraordinary
meetings attherequest oftheMinister orifmore thanhalfoftheelected members
sorequest.
(5) Theduration ofanextraordinary session shallnotexceed three days.
(6) TheLocal Government Council shallmeetbyrightonthefirstThursday following
thepublication oftheofficial results oftheLocal Government Council election.
MembersoftheLocalGovernmentCouncilshallappointamongthemselvesaChairman
andnomorethanthreedeputy-chairmen. Theyshallbeappointed byamajority voting.
Thevoting shallbedonebysecret ballot.WT/ACC/VUT/2
Page38
(7) TheChairman andDeputy-Chairmen shallholdoffice foratermoftwoyears.
(8) TheChairman shallbetheChief Executive Officer oftheCouncil.
(9) TheChairman shallpreside atallmeetings incompliance withtheprovisions ofthe
Standing Orders oftheCouncil. Upon evidence ofhisabsence orincapacity, oneof
thedeputy-chairmen shall, intheorder oftheir appointments, replace him. The
Chairman ortheDeputy-Chairmen substituting forhimmay, ifhedeems necessary,
request theassistance ofanypolice officer torestore order inthemeeting chamber.
(10) Members ofParliament elected within theLocal Government Region mayattherequest
oftheLocal Government Council ofthatregion attend andaddress anymeeting of
thatCouncil onanyspecific matter orissue.
PROCEDURE FOR ENACTING BY-LAWS
9. (1) TheLocal Government Council shalldealwithdraftby-laws tabled byanymember
oftheLocal Government Council withtheChairman oftheCouncil.
(2) Draft by-laws andproposals shallbevoted onbytheCouncil afterhaving heard the
opinion oftheappointed members.
STANDING ORDERS
10. (1) Each Local Government Council shallmake itsownstanding orders.
(2) TheLocal Government Council shallvoteontheapproval ofthestanding orders of
theCouncil afterhaving heard theviews oftheappointed members. TheChairman
shalldraw uptheOrder ofBusiness.
SETTING UPOFACOMMITTEE
11. ALocal Government Council may, fromtimetotime, fromamong itsmembers, appoint and
dissolve, acommittee responsible formatters relating todraftby-laws orforanygeneral or
specific purposes which intheopinion oftheLocal Government Council would bebetter
regulated andmanaged byacommittee. Thecomposition ofsuch acommittee shall be
proportional tothevarious opinions heldwithin theCouncil.
VOTING AND QUORUM
12. (1) Alldecisions shallbedetermined byamajority ofthevotes oftheelected members
present. Each elected member present shallhavetherighttocastonlyonevote.
(2) Thequorum required formeetings oftheCouncil shallbemore thanhalfofthetotal
number ofelected members.
(3) Incaseofatievote, theChairman shallhaveacasting vote.WT/ACC/VUT/2
Page39
NEW ELECTION, DISSOLUTION OFLOCAL GOVERNMENT COUNCILS AND DELEGATION
OFRESPONSIBILITY
13. (1) Ifforanyreason halfoftheseatsofaLocal Government Council become vacant, a
newelection shallbecalled within thetwomonths following thedatethelatest seat
became vacant.
(2) Ifthislatest vacancy occurs inthelastsixmonths ofthenormal termoftheCouncil,
thePrime Minister shall, upon therecommendation oftheMinister, issue anorder
todissolve theLocal Government Council.
(3) Day-to-day on-going business shallthenbeattended tobytheMinister orhemay
delegate thisresponsibility toapublic servant.
DISSOLUTIONOFLOCALGOVERNMENTCOUNCILSANDELECTIONFORANEWCOUNCIL
14. (1) Should thenormal running ofaLocal Government Council beimpeded, suchasbeing
unable tositforthree consecutive sittings forlackofaquorum, thePrime Minister
shall, uponrecommendation fromtheMinister, issueanorder todissolve theCouncil
forcause.
(2) Elections foranewCouncil shallbeheldnotlaterthantwomonths following thedate
onwhich theorder waspublished intheOfficial Gazette. During thisperiod, the
day-to-day on-going business shallbeattended tobytheMinister orhemaydelegate
thisresponsibility toapublic servant.
(3) Nodissolution shallbemade within thenexttwelve months following theelection of
anewLocal Government Council which istaking overfrom theonedissolved.
However, ifduring thisperiod therunning oftheCouncil isagain impeded onsimilar
grounds asthose inSubsection (1)ofthisSection, thePrime Minister may, upon
recommendation oftheMinister, issue anorder totemporarily suspend theCouncil
foraperiod notexceeding sixmonths. During thisperiod ofsuspension theday-to-day
on-going business shall beattended tobytheMinister orhemaydelegate this
responsibility toapublic servant.
APPROVED BY-LAWS
15. (1) TheChairman oftheLocal Government Council shallsubmit attheearliest opportunity
acopy ofallapproved by-laws totheLocal Government Region Executive Officer
andshallhaveacopydisplayed ontheLocal Government Region headquarters notice
board.
(2) During 15daysfollowing thedisplay oftheby-law onthenotice board, thepopulation
oftheLocalGovernmentRegionconcernedandtheLocalGovernmentRegionExecutive
Officer maysubmit theircomplaints onthelegality orrelevancy ofthesaidby-law
totheChairman oftheLocal Government Council.
(3) Attheendofthisfifteen dayperiod theChairman oftheLocal Government Council
maytheneither:
(a) Submit theby-law totheMinister forpublication intheOfficial Gazette if
nocomplaint hasbeenreceived;WT/ACC/VUT/2
Page40
(b) ifacomplaint isreceived inthatperiod:
(i) andhethinks thatthecomplaints made maybejustified, convene a
meeting oftheCouncil todebate theissue;
(ii) butifhethinks thatthecomplaint isnotjustified orissubstantially
similar tomatters already considered, heshallnotify thecomplainant
inwriting andmaythensubmit theby-law totheMinister asin
subparagraph (a)attheexpiry of15daysfrom suchnotification.
PUBLICATION AND COMMENCEMENT OFBY-LAWS
16. (1) Subject totheprovisions ofSection 18upon receiving theby-law submitted tohim
under Section 15(3)(a), theMinister shallensure itspublication intheOfficial Gazette.
Thisby-law shallcome intoforce asfrom thedateofitspublication intheOfficial
Gazette.
(2) Within the15daysfollowing thecommencement dateoftheby-law, ifaperson feels
thattheby-law wasunfair tohimorifhefeelsthatthecontent ofthesaidby-law
contradicts theessence oftheConstitution orexisting laws, hemayrequest foran
enquiry tobeconducted onthelegality ofthesaidby-law byacompetent court.
(3) Thefiling ofsucharequest shallnotprevent theby-law from being implemented.
SUPREME COURT TOASSESS THE LEGALITY OFBY-LAWS
17. TheSupreme Court shallbethecompetent judicial bodytoassess thelegality ofby-laws enacted
byLocal Government Councils.
PROCEDURE ONRECEIPT OFBY-LAWS BYTHE MINISTER
18. (1) When theMinister receives aby-law under theprovisions ofSection 15(3) above, he
mayeither:
(a) Proceed withthepublication ofthesaidby-law according totheconditions
andwiththeconsequences provided forunder Section 16above; or
(b) request theSupreme Court toassess itslegality. Inthiscaseheshallnot
proceed withthepublication oftheby-law andshallimmediately inform the
Chairman oftheLocal Government Council which enacted theby-law in
question.
(2) TheSupreme Court mayeither:
(a) Ruleoutthewhole textorpartthereof; or
(b) confirm thelegality ofthesaidby-law. Inthelatter casetheMinister shall
therefore ensure theofficial publication oftheby-law within eight days
following thedateoftheSupreme Court 'sdecision. Theby-law shall
henceforth beenforced according totheconditions specified under Section 16,
andnoother request forassessment ofthelegality ofthesaidregulation shall
bereceived bytheSupreme Court from anyperson orbody corporate.WT/ACC/VUT/2
Page41
PART IV
THE LOCAL GOVERNMENT REGION EXECUTIVE OFFICER
LOCAL GOVERNMENT REGION EXECUTIVE OFFICER TOREPRESENT THE MINISTER
19. (1) TheLocal Government Region Executive Officer shallrepresent theMinister andthe
Government within theLocal Government Region.
(2) Heshallbeappointed byorder made bythePrime Minister afterconsultation with
theMinister.
(3) TheMinister shallbyorder prescribe thefunctions andduties oftheLocal Government
Region Executive Officer.
(4) TheLocal Government Region Executive Officer shallperform anddischarge allacts
andresponsibilities which arebythisActorbyorder orregulation made under this
Actdirected orempowered tobedonebysuchofficer.
PART V
POWERS OFTHE LOCAL GOVERNMENT COUNCILS TOMAKE BY-LAWS
POWER TOMAKE BY-LAWS
20. Asfromthedates theyareestablished, Local Government Councils areempowered tomake
by-laws, onthematters listed below:
(1) Choose thelocation andberesponsible forconstructing, maintaining andmanaging
public facilities suchas:
- Primary schools, health facilities, bridges androads (except roadnetwork
under theresponsibility ofthenational government), water supply, wharves
andjetties, commercial centres, libraries, museums andcultural centres;
(2) Management andcontrol ofpublic market places;
(3) Rules andregulations governing matters relating tohygiene andpublic health in
compliance withthegeneral conditions setoutunder thelaw;
(4) Rules andregulations governing professional activities relating totheissuing oflicences
payable toLocal Government Councils;
(5) Rules andregulations governing fishing andconditions relating totheissuing offishing
licences covering sixnautical miles asfromthelowtideforeshore ofallislands making
uptheLocal Government Region;
(6) Setoutconditions oftheissuing oflicences foroperating cinemas, commercial
businesses, individual orgroup landorseatransport services within theLocal
Government Region;WT/ACC/VUT/2
Page42
(7) Draw upstatutory regulations relating toterms andconditions ofrecruitment, careers
andtermination ofservice necessary fortheproper administration oftheLocal
Government Council service departments. Innowayshallthese officers beregarded
aspublic servants;
(8) Clearly setouttheeconomic development policies andplans oftheLocal Government
Region;
(9) Outline, create anddrawupregulations governing theenvironmental protection zones
(natural parks, natural reserves ortourist-attraction areas) subject toanylegislation
creating environmental protected areas inthenational interest;
(10) Decideonpenaltiestobeimposedonpersonsinvolvedinbreakingtheby-lawsapproved
bytheLocal Government Council. Themaximum amount forsuchpenalties shall
notexceed Vt.50,000 foreachconviction.
POWER TOHAKE BY-LAWS FIXING RATES AND TAXES FOR ISSUE OFLICENCES
21. (1) TheLocal Government Councils shallhavethepower tomake by-laws fixing:
(a) ratesandtaxes payable fortheissue oflicences forprofessional activities as
stated inSection 20(5) and(6);and
(b) ratesandtaxes, payable forthelanding andtake-off ofaircraft, landing of
ships andboats.
Revenue from these ratesandtaxes shallbepaiddirectly totheLocal Government
Councils.
(2) Where theGovernment ratesandtaxes existregarding international connections, the
LocalGovernmentCouncilsshallhavethepowertomakeby-lawsforadditionalamounts
which maynotexceed 10percentoftheexisting tax. These by-laws must be
specifically endorsed bytheMinister afterconsultation withtheMinister ofFinance.
POWER TOMAKE BY-LAWS SPECIFYING RATES AND TAXES FOR LOCAL PURPOSES
22. Local Government Councils shallhavethepower tomake by-laws specifying ratesandtaxes
forlocalpurposes onthepeople, properties andservices within theirareaofjurisdiction.
ARTICLE VI
ALLOWANCES
ALLOWANCES TOMEMBERS
(1) Members ofLocal Government Councils andthemembers ofanycommittees setup
bytheLocal Government Councils areentitled toanallowance theamount ofwhich
shall bedetermined bytheCouncil butshall notexceed themaximum amount of
Vt.2,500 perday'ssitting.
(2) Members ofLocal Government Councils andthemembers ofanycommittees setup
bytheLocal Government Councils areentitled toarefund oftheir travelling andWT/ACC/VUT/2
Page43
accommodation expenses when travelling toattend Council orcommittee meetings as
thecasemaybe.Reimbursement shallnotbepaidunless proof ofpayment isprovided.
Procedures forreimbursement andcalculation ofattendance shallbespecified inthe
Council 'sstanding orders.
(3) (i) There shallbepaidtoelected andappointed members oftheLocal Government
Councils, amonthly allowance notexceeding Vt.10,000.
(ii) TheChairman ofeachLocal Government Council shallbepaidinaddition
totheallowance specified inparagraph (i)amonthly allowance ofVt.5,000.
PAYMENT OFGRATUITIES
(1) Elected andappointed members ofLocal Government Councils shallreceive, atthe
endoftheirtermofoffice, apayment ofgratuity andtherateofthatgratuity shall
bedetermined bytheby-laws made bytheLocal Government Councils.
(2) Thegratuity payable toeachelected andappointed member under Subsection (1)shall
notexceed anamount equal to15percentofallmonthly allowances received bysuch
member during histerminoffice.
PART VII
FUNDING OFLOCAL GOVERNMENT COUNCILS
REVENUE
25. Therevenue ofaLocal Government Council shallconsist of:
(a) Anadministration subsidy from theGovernment;
(b) anequipment grant from theGovernment;
(c) loans;
(d) proceeds from Local Government Council ratesandtaxes andadded-value taxes;
(e) various subsidies;
(f) donations andlegacies.
DETERMINATION OFADMINISTRATION SUBSIDY
26. (1) TheadministrationsubsidyshallbedeterminedeachyearduringtheGovernmentbudget
session inaccordance withasubstantiated request forwarded byeachLocal Government
Council. For1994 thisbudget shallbeatleastanequivalent oftherunning costs of
public services andfacilities already existing ineachLocal Government Region.
(2) Thedistribution criteria for1994shallbebased onaparformula. However, thismay
beamended infuture bylegislation taking intoaccount matters suchaschanges inschoolWT/ACC/VUT/2
Page44
agepopulation, thescope andvolume ofcommunication network ineach Local
Government Region.
GRANTS FOR MATERIAL SUPPLIES
27. (1) Theequipment grant shallbedetermined eachyearduring theGovernment budget
session. For1994, itshallconsist ofapercentage ofrevenues collected during the
1992 financial yearbutthispercentage shall notbelessthan5percent. Itshall
thereafter follow recorded variations ofthetotalrevenues collected eachyear.
(2) Thedistribution ofthisgrant between eachLocal Government Council in1994 shall
bebased onaparformula. Thisdistribution criteria maybealtered infuture pursuant
totheprovisions andinways provided forinSection 26(2).
LOANS
28. Local Government Councils arehereby authorized toborrow money fromnational aswellas
international lenders. Thetotalamount ofsuch loans shall notexceed Vt.20,000,000
(twenty million). Thedecision toproceed withaloanshallberecorded inaLocal Government
Council order ofwhich terms andconditions areprovided forinSections 9to17ofthisAct.
Thisorder shallnotbeexecuted untilitisexpressly approved byanorder issued bytheMinister
afterconsultation withtheMinister ofFinance.
PART VIII
LOCAL GOVERNMENT COUNCIL BUDGET
PREPARATION AND APPROVAL OFBUDGET
29. TheLocal Government Councils shallapprove theirownbudget intheformofanorder. The
draftbudget, ashasbeenprepared bytheChairman, shallbetabled withtheLocal Government
Council notlaterthan1October ofeachyear.
COUNCIL TOAPPROVE TRUE BALANCED BUDGET
30. TheCouncil shallapprove atruebalanced budget. Noadditional expenditure shallbeallowed
unless itisoffset bynewrevenue oranequivalent cutintheapproved budget.
FAILURE TOAPPROVE BUDGET
31. (1) IftheLocal Government Council failstoapprove thebudget during itsbudgetary
meeting or,atthelatest, bymidnight on31December, theMinister shallissueanorder
dulycountersigned bytheMinister responsible forFinance torelease thedraftbudget.
(2) TheMinisterial Order shallcome intoforceonthedateofitspublication intheOfficial
Gazette.WT/ACC/VUT/2
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PART IX
MISCELLANEOUS AND TRANSITIONAL PROVISIONS
ELECTION AND APPOINTMENT OFMEMBERS
32. (1) Elections forLocal Government Councils shallbeheldduring 1994.
(2) Appointment ofmembers oftheLocal Government Councils shallbemade within
three weeks following thedateoftheelection under Subsection (1).
(3) ThePrime Minister mayinorder toprovide forelection fortheLocal Government
Councils under thisAct,dissolve anyLocal Government Council which continues to
beinexistence afterthecommencement ofthisAct,inpursuance ofSection 36ofthis
Act.
(4) Thedatefortheelections oftheLocal Government Councils shallbeestablished by
theElectoral Commission inconsultation withtheMinister.
DEPARTMENT OFLOCAL GOVERNMENT TOASSIST AND ADVISE THE MINISTER
33. TheDepartmentofLocalGovernmentshallberesponsibleforassistingtheMinisterandadvising
Local Government Councils onmatters relating tothisAct.
PROVISIONSNOTTOBEAPPLICABLEWITHINMUNICIPALITIESANDTHEIRBOUNDARIES
34. (1) Theprovisions ofthisActshall notapply within Municipality boundaries and
Municipalities aredeemed nottobeincluded inanyLocal Government Region.
(2) InSubsection (1)"Municipality" means amunicipality established under the
Municipalities Act(CAP. 126).
REGULATIONS MADE BYTHE MINISTER
35. TheMinister maymake regulations notinconsistent withthisAct,forandinrespect ofmatters
necessary forthebetter carrying outoftheprovision ofthisAct.
REPEAL AND SAVINGS
36. (1) Decentralization Act(CAP. 127)ishereby repealed.
(2) Notwithstanding therepeal oftheDecentralization Act(CAP. 127).
(a) Local Government Councils established under thatActshallcontinue tobe
inexistence andthemembers ofthose Councils shallcontinue toremain in
office until those Councils aredissolved bythePrime Minister under
Section 32(3) ofthisAct;
(b) All regional laws and any statutory orders made under the
Decentralization Act(CAP. 127)andinforceimmediately priortothecoming
intooperation ofthisAct,shallsofarastheyarenotinconsistent withtheWT/ACC/VUT/2
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provisions ofthisAct,continue inforceuntilamended orreplaced byby-laws
orstatutory orders, asthecasemaybe,made under thisAct.
COMMENCEMENT
37. ThisActshallcome intoforce onthedateofitspublication intheGazette.