News Release

Asian Development Bank Manila, Philippines November 4, 2003

The Asian Development Bank will focus on promoting an increased role for the private sector in Vanuatu over the next three years to boost economic growth, according to the Country Strategy and Program (CSP) Update for 2004-2006 endorsed yesterday by ADB's Board of Directors.

Vanuatu is ranked the third poorest country among ADB's Pacific Island developing member countries, with 40% of its population living below the poverty line.

Real gross domestic product fell in 2001 and 2002, although a modest recovery of 1.3% growth this year and 2.2% in 2004 is forecast by ADB.

ADB's strategy in Vanuatu addresses the underlying institutional constraints on economic development, including a lack of consistency and transparency in government decision-making, a high cost and uncertain environment for business, and a lack of fiscal capacity to expand essential public services.

ADB recently assisted the Government to prepare a priorities and action framework and to conduct a development partners meeting. It is also helping build the capacity of the Parliament and the National Statistics Office.

Assistance over the next three years will be pursued mostly through a US$1.45 million technical assistance (TA) program.

A TA cluster spread over the three years will build on a diagnostic study for improving access to credit in 2003.

This will be followed with development of the legal and regulatory framework for secured transactions in 2004, a feasibility study of a credit reference facility in 2005, and the establishment of a registration system for secured transactions in 2006.

TAs are planned for rural financial services and implementation of the priorities and action agenda this year, to be followed by grants over the following three years for rural productive skills development, capacity building in infrastructure management, and strengthening development policies.

The Government has indicated that its budget deficit and flow of debt constrain it from borrowing from ADB and other agencies for the next two to three years.

Therefore, a minimal lending program is planned for the period, involving one loan - $3.8 million - for an Outer Islands Infrastructure Development Project in 2005, to help improve access to markets and social services for remote islanders.

As the preparation for this project, which dates back to 1999, a small-scale TA may review the project to reassess its priorities and provide any needed updates in design and costing.

Between June 1982 and end-2002, ADB provided nine loans and 51 TAs to Vanuatu totaling $51.25 million and $12.75 million, respectively. The most recent loan, for cyclone emergency rehabilitation approved in 1999 for $2 million, was successfully completed in December 2000. A comprehensive reform program loan, completed in the same year, helped prevent the collapse of the National Bank and the Provident Fund, and improve governance, but has failed to generate the expected economic growth.

CSPs define ADB's medium-term development strategy as agreed with the country. A CSP update is usually prepared every year taking into account the continued relevance of the CSP, its implementation, and ADB's operational program for the next three years.

November 5, 2003


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