Investment Climate Advisory Services T Group World Bank Success Stories: FOREIGN INVESTMENT PROCESSES STREAMLINED IN VANUATU The government of the Pacific island nation of Vanuatu and here. There’s a lot less red tape than in Australia and most IFC recently halved the approval time for foreign invest- developed countries.” ments to just 15 days, a reform that helps to create jobs for the local economy by allowing investors set up their businesses quickly and more easily. Foreign direct investment is a significant driver of employ- ment in Vanuatu. According to the Vanuatu National Provi- dent Fund, foreign investors employ close to 40 percent of the workforce. At the same time, Vanuatu’s percentage share of the Pacific foreign direct investment pool has fallen from around 24 percent in the 1990s to around eight percent in 2008, according to the 2008 UNCTAD World Investment Report. BENEFITS FOR INVESTORS Employees of Rod Smith's company, Vanuatu Working with the Vanuatu Investment Promotion Authority, IFC consultants helped streamline procedures in the IFC has also helped the Vanuatu Investment Promotion processing of Foreign Investment Approval Certificates, Authority to clarify its role as being solely responsible for focusing on changes that could be made without amend- promoting investment. ments to the Foreign Investment Promotion Act. No legisla- tive changes meant these new processes could be intro- Tebu explains: “We used to be considered more of a regula- duced quickly, while laying the groundwork for future tor, but now the government is recognizing (us) as a amendments to the Act. promoter of investment, with a policy advocacy role in the As a result, the processing time for a Certificate has been future. With that recognition, the government is able to cut from 30 to 15 working days, with many applications provide extra budgetary resources, meaning that we can being approved in less than 15 days. now recruit more staff, including a new Foreign Investment Promotion Manager.” “You can come in on Monday and get the approval by the end of the week and start doing business the following Accountant Mark Stafford has been dealing with the Invest- week,” says Smith Tebu, the CEO of the Vanuatu Investment ment Promotion Authority since its inception in 1998. He is Promotion Authority. engaged by overseas investors hoping to establish businesses in Vanuatu to lodge applications on their For long-time foreign investors like Rod Smith, the differ- behalf. ence is noticeable. The Vanuatu authorities processed the license for his IT company in just eight business days. “Prior to the reforms we suffered a lot of frustration, mainly because they didn’t have a process in place to assess appli- “We applied for the new business licence through the cations, and variations to them, without all sitting down Authority in late 2009, the staff were efficient, and it was around one table,” explains Stafford. “All too often, sched- processed nice and quickly,” he says. “I like doing business uled meetings were postponed, deferred, or never Easing regulatory requirements for business entry and operations is an Investment Climate Advisory Service of the World Bank Group in partnership with: happened, and we had frustrated new investors who were “We needed to disseminate information and educate people trying to get the process working.” about the short- and long-term positives of foreign invest- ment, the contribution of investment to our local economy, Since the reforms were implemented, most of Stafford’s and how it will involve the local people,” explains Tebu. applications have been processed in two weeks or less, leaving him with more time to devote to other potential LOOKING AHEAD investors, and keeping his clients satisfied. CEO Smith Tebu believes the reforms will be crucial in “As the service provider who has to deal with the clients helping the organisation attract more investment in future continually chasing us, it’s become a much more pleasant and ultimately deliver more benefits to the people of environment for us,” he says. “We’re also getting more Vanuatu in the forms of more jobs and income opportuni- value from the Authority, because we no longer have to go ties. backwards and forwards three or four times. If we have a fixed fee arrangement with clients for applications, we “IFC’s support for this project is very timely, because we can’t necessarily charge them more because of delays in must strengthen our systems first, before we expand,” says the system, so the reforms have made the process more Tebu. “Vanuatu has been good at promoting tourism, but cost effective for us.” we need to be more aggressive in promoting business and investment more broadly. This project will help strengthen Future amendments to the Act are being considered, such government policy regarding which specific sectors we will as broadening the Authority’s mandate to include citizen- be promoting to both foreign and citizen investors.” owned investment. New national goals will also be set for foreign direct investment. The government undertook national consultations, explaining the benefits of foreign Results investment-related growth and gathering feedback from local business owners and community groups, as a first • Target time for approving a foreign invest- step to determining the goals. ment licence reduced from 30 to 15 work- ing days, with many applications approved within five days • New printed application guide clarifies FDI process • Number of different FDI application forms required from each investor reduced from four to three • Monthly board meeting approval session replaced by email contact between board members within five working days Women representatives were invited for the first time to attend the community connsultation session on foreign investment in Malekula, Vanuatu. Contact: Jonathon Kirkby IFC Pacific Program Manager, Investment Climate Advisory Services Ph: +61 (2) 9235 6519 Fax: +61 (2) 9235 2533 Email: JKirkby@ifc.org