Opinion & Commentary
US should reconsider financial aid for Vanuatu
Vanuatu is among a select group of countries eligible for hundreds of millions of dollars in assistance through the millennium challenge account (MCA) in 2006. The MCA is a United States government aid initiative overseen by the Millennium Challenge Corporation (MCC) which recognises that economic growth is the best way out of poverty and that aid is most effective in countries with pro-growth policies.
MCA funds are intended to help nations that govern justly, invest in their people and encourage economic freedom. Eligibility is based on performance against 16 indicators across these three categories. They range from the rule of law and control of corruption (governing justly) to social expenditure ratios and immunisation rates (investing in people) to budget deficits and regulatory quality (economic freedom).
Eyebrows were raised when it was announced last year that Vanuatu had been selected in the first round of eligible countries. Vanuatu technically meets the MCA indicators but its commitment to reform has been largely rhetorical. By contrast Samoa , a Pacific country with a consistent record of reform, did not even make the first selection round.
Vanuatu is a democracy in name only. Members of parliament do not govern justly but abuse their political power for personal gain. Elections are a contest among rural big men and their parliamentary cronies for access to state resources.
Expenditure ratios for health and education reflect budget papers and not reality. Vanuatu has some of the worst social indicators in the Pacific, with high infant and maternal mortality rates. Education is a travesty.
Some macro-economic stability has been achieved, with low inflation, low interest rates and a small budget surplus. But real gross domestic product per capita growth has fallen below levels seen at independence in 1980. There is almost no job creation outside the capital, Port Vila. Most of Vanuatu 's 200,000 people eke out subsistence existences in villages.
According to a Radio New Zealand International report on negotiations in Sydney last month, the Vanuatu government has persuaded MCC representatives that funds will "boost rural infrastructure development, with improvements to roads, wharves and other facilities in remote areas". The Vanuatu parliament, the US Congress and the MCC board of directors must now endorse the agreement.
MCA funds are meant to reward performance, not promises. By again selecting Vanuatu as an eligible country, the MCC has opened the door to one of the least-deserving governments in the Pacific for the biggest single funding windfall the island nation has ever seen. The crooks in Port Vila will be laughing all the way to the bank.
Susan Windybank is foreign policy research director at The Centre for Independent Studies.
