anuatu’s economic freedom score is 60.7, making its economy the V 98th freest in the 2020 Index. Its overall score has increased by 4.3 points due to a significant recovery in fiscal health. Vanuatu is ranked 19th among 42 countries in the Asia–Pacific region, and its overall score is approximately equal to the regional average and slightly below the world average.

WORLD RANK: REGIONAL RANK: The economy of Vanuatu returned to the ranks of the moderately free this year, but just barely. GDP growth during the past five years has 98 19 been solid.

ECONOMIC FREEDOM STATUS: Economic freedom could be improved in Vanuatu if the government MODERATELY FREE took steps to improve the business climate, reform the judicial system, open the financial sector to more competition, and fight corruption more energetically. Frequent changes of allegiance by members of parliament, as well as tight restrictions on when and for how long parliament can sit, continue to have a negative effect on the formulation and implementa- tion of policy.

ECONOMIC FREEDOM SCORE

▲ UP 4.3 POINTS 60.7

0 50 60 70 80 100

REGIONAL AVERAGE WORLD (ASIA-PACIFIC REGION) 61.1 61.6 AVERAGE

HISTORICAL INDEX SCORE CHANGE (SINCE 2009): +2.3

RECENT FREEDOM TREND QUICK FACTS



POPULATION: UNEMPLOYMENT: 69.5 0.3 million 5.4%  67.4 GDP (PPP): (CPI): $0.8 billion 2.8% 60.8 60.7 3.2% growth in 2018

5-year compound FDI INFLOW:  $38.0 million 56.4 annual growth 2.7% $2,862 per capita PUBLIC DEBT: 50.5% of GDP 

      2018 data unless otherwise noted. Data compiled as of September 2019

BACKGROUND: Waves of colonizers migrated to the South Pacific’s archipelago in the millennia preceding European colonization in the 18th century. The Republic of Vanuatu won independence from joint British–French administration in 1980 and today is a parliamentary democracy divided between its English-speaking and French-speaking citizens. Charlot Salwai of the Reunification of Movements for Change became prime minister in 2016 following snap elections called after 14 members of parliament were convicted of bribery. Vanuatu is heavily dependent on , particularly subsistence farming, and , which comprises 40 percent of the economy. Much of the reconstruction needed to recover from 2015’s destructive Cyclone Pam, which had a devastating impact on tourism, ended in 2019.

468 2020 Index of Economic Freedom WORLD AVERAGE | ONE-YEAR SCORE CHANGE IN PARENTHESES 12 ECONOMIC FREEDOMS | VANUATU

RULE OF LAW GOVERNMENT SIZE

(+2.4) (–0.3) (–14.5) (–0.2) (+7.0) (+63.1)

 

 

 

 

 

68.3 36.1 37.4 97.1 61.1 78.4   Property Judicial Government Tax Government Fiscal Rights E ectiveness Integrity Burden Spending Health

The legal framework generally supports property rights, Vanuatu imposes no individual or corporate income tax. Taxes but irregularities surrounding land deals and corruption in include a value-added tax and import duties. The overall tax the Lands Ministry are persistent problems. The judiciary is burden equals 17.1 percent of total domestic income. Govern- largely independent but lacks the resources to retain qualified ment spending has amounted to 36.0 percent of the country’s personnel. It takes an average of 480 days to resolve a dis- output (GDP) over the past three years, and budget deficits pute. Factionalism continues to undermine political stability, have averaged 3.2 percent of GDP. Public debt is equivalent to making the government vulnerable to corruption. 50.5 percent of GDP.

 REGULATORY EFFICIENCY OPEN MARKETS

(–0.6) (–4.2) (–0.4) (–1.0) (No change) (No change)

 

 

 

 

 

51.8 54.6 74.6 63.4 65.0 40.0   Business Labor Monetary Trade Investment Financial Freedom Freedom Freedom Freedom Freedom Freedom

Complex and nontransparent bureaucratic procedures are an The total value of exports and imports of goods and services impediment to entrepreneurial activity. Rigid and outmoded equals 97.9 percent of GDP. The average applied tariff rate labor codes keep a formal labor market from developing. is 8.3 percent. Vanuatu has taken measures to streamline The country continues to subsidize poorly managed and its customs procedures. The state screens new foreign money-losing state-owned enterprises in such sectors as investment, and foreign investors may lease but not own agriculture, airports, banking, and broadcasting. land. The financial sector remains rudimentary. The state- owned National Bank of Vanuatu has the country’s largest branch network.

The Heritage Foundation | heritage.org/Index 469