Vila Times

‘Our work unlocked China’s tourist market for Vanuatu’

‘Our work unlocked China’s tourist market for Vanuatu’
‘Our work unlocked China’s tourist market for Vanuatu’
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Deva De Silva, International Finance Corporation (IFC) resident representative for Fiji, in this exclusive interview for Vila Times talks about the Pacific business sector, value of Vanuatu’s tourism market, the importance of governance for family businesses and opportunities for investments in Vanuatu.


‘The Pacific business sector has several success stories related to niche products and markets that it could leverage of’


– Hello Mr De Silva. Recently the Pacific Corporate Governance Institute (PCGI) was launched “to promote good governance practices in the business sector.” So in your opinion, what are the main issues in the Pacific business sector that need to be fixed?


First, in case you don’t know much about IFC, I thought I would explain that we are a sister organisation of the World Bank, and member of the World Bank Group. IFC is the largest global development institution focused on the private sector in emerging markets. We believe that a strong and engaged private sector is indispensable to ending extreme poverty and boosting shared prosperity. That’s where IFC comes in – we have more than 60 years of experience in unlocking private investment, creating markets and opportunities where they’re needed most.

The Pacific business sector has several success stories relating to niche products and markets that it could leverage of like the tourism offering, pure natural virgin coconut oil, spa products and coffee. The region also faces many constraints, which inhibit the growth of the business sector such as distance from key markets, low capacity, scale and management skills, access to finance, low investor confidence and product quality certifications.

Good governance will help to increase investor confidence in companies while helping the companies improve performance, better manage risk, and strengthen competitiveness.


‘Common limitation faced by most countries in the region is a weak business enabling environment for private sector growth, foreign investments and trade’


– What are the best countries in the Pacific to invest into and do business in, today?


Each country has its own strengths and weaknesses in terms of developing a strong business sector. They have to identify those, address the issues and build on their strengths.

While some of them like Fiji have an inherent geographical advantage, which has helped them to develop a strong product identity as a large-scale tourist destination, most of the others also have capacity to build a ‘niche’ tourism offering including offers around game fishing, diving sites, adventure and eco-tourism. A common limitation faced by most countries in the region is a weak business enabling environment for private sector growth, foreign direct investments and trade.


‘Tourists spent $145 million in Vanuatu in 2016, an increase of 9 percent over 2015’


– What about Vanuatu in particular?


IFC has been working in Vanuatu for quite a while, in fact one of our first financing was for upgrading a resort back in 1987, as a way of helping to spur jobs. IFC also worked to help improve the investment climate in Vanuatu, to help spur private sector investments, by working with government to advise on reforms to streamline regulatory and administrative processes and foster investment policy and promotion. This work has led to a reduction in the average time required to start up a business, or for instance obtain a license.

IFC has been working to bolster Vanuatu’s tourism. An IFC-led survey released last year demonstrated the value of Vanuatu’s tourism sector. The International Visitor Survey, completed in partnership with the Vanuatu Government, showed tourists spent $145 million in Vanuatu in 2016, an increase of 9 percent over 2015.

One of IFC’s plans for its tourism program is to help create new markets to boost economic growth. So while we recognize that markets like Australia and New Zealand are vital to the tourist industry, we’ve also worked to tap into high spending, long haul and niche markets. And that work has really activated the world’s largest and fastest growing tourist market, China, for Vanuatu – delivering 35 percent year on year growth in Chinese arrivals.

Vanuatu presents some very interesting opportunities for growth including its famous Vanuatu beef, coconut based products as well as tourism sites for both cruise and holiday seekers.


‘Vanuatu has an opportunity to build on its traditional strengths in beef, coffee and coconut products’


– Which industries in your opinion, besides the obvious tourism, fishery and agriculture, have the most potential for investments in Vanuatu?

Vanuatu has an opportunity to build on its traditional strengths in beef, coffee and coconut based products (copra and oil).


‘In the small markets in the Pacific region, family owned businesses are very common’


– During the launch of PCGI the importance of governance for family businesses was specified. What are the main issues in this kind of businesses currently, and why it is considered important to help them?


In the small markets in the Pacific region, family owned businesses are very common. Some of these businesses have now developed into reasonably large diversified business houses.
Family owned businesses sometimes tend to struggle to develop beyond a certain point. A mere 33 percent survive the founder and an astounding 95 percent fail by the third generation. They often become victims of their own making, failing to prepare for the demands of a growing business and a much larger family network. While some of them have seen potential to undertake public listings like in Fiji and Papua New Guinea, others have the option to enter into strategic partnerships and joint venture business models if stronger governance practices are instilled into these businesses.


– What is the proportion of family businesses in the Pacific? I assume there are a lot more family businesses in Fiji, compared to other countries in the Pacific.

Family-owned companies are a key fabric of its economy and society at large. Family-owned business represents an important segment and a large percentage of small and medium sized enterprises. This scenario is unlikely to change soon, even as the country develops its capital market and ushers in more foreign investment.

One of the interesting phenomena we see in Fiji is that its traditional family owned business houses are currently expanding into other diversified businesses plus also expanding into other countries in the region. These businesses are also exploring joint venture partnerships and engaging with the corporate entities to seek advice on accessing new capital through listing part ownership in their respective companies on the South Pacific Stock Exchange. This strategy allows the ‘older’ generations involved in the business to liquidate part of their shares and for the younger generations to enter into the business.


– So the PCGI program is delivered in partnership with the Australian government? How it supposed to work?


PCGI has been formed initially with technical support from IFC and donor support through the Australian Government to provide professional Corporate Governance education, awareness and advocacy to the Pacific region. The PCGI will help aggregate and coordinate the various corporate governance activities in Fiji and channel expertise and resources through a single entity.

The longer term vision is that PCGI will run independent of any financial or operational support from IFC or the Australian Government but rather as a self-sustainable entity not only for Fiji but as the center of excellence for corporate governance in the Pacific region.


‘The Pacific will not be globally competitive in the manufacturing sector and the mass market agribusiness sectors’


– The Pacific is a region least affected by globalisation in the economy. You think we can expect some development in this direction during the next several years?


The Pacific region countries, given their smallness and remoteness have been excluded from the global business arena for a long time. The Pacific will not be globally competitive in the manufacturing sector and the mass market agribusiness sectors. However, these countries have some clear opportunities to develop some very strong niche product offerings which will never be comparable in the global market if correctly positioned.


– In one of our interviews ADB experts said Vanuatu can be a “shop window” for environment-friendly innovations in energy, solid waste management, climate-proof infrastructure. You think this is something realistic to expect or utopical after all?


The Pacific region has by compulsion more than pleasure embarked on resilient infrastructure projects including school buildings and renewable energy generation using biomass and solar technology. These opportunities have significant scope for growth in the region and beyond.

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  • Today marks another major development milestone for Vanuatu and its people.Today marks the end of the procurement process whereby after a very lengthy, arduous and under the World Bank’s strict procurement guidelines and independent process the Government of Vanuatu has finally managed to conclude its desire to implement the upgrades for Bauerfield International Airport runway. Today’s signing ceremony is significant because it could potentially trigger economic development to levels that are going to be unprecedented in Vanuatu because Bauerfield being the gateway, facilitates 80 percent of tourists and visitors and contributes 40 percent of the GDP, is going to have the capacity to accommodate long haul flights and enable Vanuatu to target a significantly greater tourist market.In 2016, approximately 95,000 visitors have arrived into Vanuatu showing an increase of over 10 % from 2015, Post Pam and Post Runway rehabilitation and the International Visitors Survey (IVS) confirms a total of USD 145 million was poured into the economy and created 37 % employment. All this is bound to increase because of this project. Today the Government of Vanuatu is executing the Lot 1 Contract Award for Vanuatu Aviation Investment Project for Bauerfield International Airport Runway Rehabilitation with the successful contractor joint venture international consortium of the CHINA CIVIL ENGINEERING CONSTRUCTION COMPANY and NORTHWEST CIVIL AVIATION AIRPORT CONSTRUCTION COMPANY.The value of the contract is USD 47,660,000 (Forty Seven Million Six Hundred and Sixty Thousand Vatu covering works on Runway, Apron and related infrastructures.