Con/Dominium of Vanuatu?

1 Sep 2006

Oxfam commissioned this case study in the hope of stimulating debate around the issue of tourism in the Pacific and the role of international trade agreements.


Tourism is a large and growing industry for many Pacific Island nations. Roughly a million tourists visit the region each year and tourism is the largest foreign exchange earner for several Pacific ACP countries.1 The majority of tourists come from Australia and New Zealand, with significant numbers also arriving from the United States, Japan and Great Britain.2 Many of the tourism operators in the Pacific are small and medium size enterprises (SMEs), with only a few large hotel operators, mostly in Fiji.

The tourist industry has both costs and benefits for countries which choose to seek the tourist dollar. Good governance of the industry involves optimising the benefits to local people and the economy, while minimising social, environmental and cultural costs.

However, the ability to regulate in this way could be constrained or even removed by commitments in international trade deals. For example, commitments under the General Agreement on Trade in Services (GATS) at the WTO may make it very difficult for Pacific countries to introduce new regulations to share economic benefits with local communities or to protect the environment because any foreign tourism operator affected by the regulations can ask their home government to complain to the WTO on the basis that the regulations are an unnecessary barrier to trade.The Vanuatu tourism industry provides a cautionary tale.

The following case study shows that the industry has far more costs and fewer benefits than it should for local people and the Vanuatu economy. Its benefits accrue overwhelmingly to foreign companies and wealthy expatriate residents, who have taken advantage of Vanuatu’s current lack of effective regulation to reap fat profits, while leaving the social, cultural and environmental costs to be borne by the ni-Vanuatu. The case study also highlights the rash of land sales on Efate that are enriching real estate agents but leaving ni-Vanuatu landless and with only a small fraction of the land value.

If this situation is to be turned around, Vanuatu needs to undertake major reform of its laws and practices. It will only be able to do so if it retains the policy space it needs. This policy space is currently at risk in several looming trade agreements: the Economic Partnership Agreement (EPA) with the EU, moves to restart Vanuatu’s suspended negotiations to accede to the WTO,3 and PACER, the proposed free trade deal between all Pacific Forum countries, including Australia and New Zealand.

Because negotiations on the EPA are currently underway, with the EU pushing for a deal to be concluded by the end of 2007, its potential to constrain the ability of Pacific countries to regulate their tourism industries in the public interest is discussed in Appendix one to this case study.

An earlier draft of this paper was presented to the “Pacific Civil Society Conference on Trade Negotiations” held on 15 June 2006 in Nadi, Fiji. Civil society groups from across the Pacific have established national networks to provide public information and influence policy. In Vanuatu, the Advocacy Coalition on Economics (ACE) is working on trade and investment issues that affect Vanuatu, including the implications for land ownership, use and benefits.

We hope this case study provides a useful contribution to the debate about trade and investment in the Pacific. Although each Pacific country’s situation is unique, there are common lessons to be learned.

Barry Coates
Executive Director


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