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Backgrounds: Vanuatu Economy
Vanuatu's economy is primarily agricultural; 80% of the population is engaged in agricultural activities that range from subsistence farming to smallholder farming of coconuts and other cash crops. Copra is by far the most important cash crop (making up more than 35% of the country's exports), followed by timber, beef, and cocoa. Kava root extract exports also have become important. In addition, the government has maintained Vanuatu's preindependence status as a tax haven and international financial center. About 2,000 registered institutions offer a wide range of offshore banking, investment, legal, accounting, and insurance and trust-company services. Vanuatu also maintains an international shipping register in New York City.
Copra, cocoa, kava and beef account for more than 60% of Vanuatu's total exports by value and agriculture accounts for approximately 20% of GDP. Tourism is Vanuatu's fastest-growing sector, having comprised 40% of GDP in 2000. Industry's portion of GDP declined from 15% to 10% between 1990 and 2000. Government consumption accounted for about 27% of GDP.
Vanuatu is a small country, with only a few commodities, mostly agricultural, produced for export. In 2000, imports exceeded exports by a ratio of nearly 4 to 1. However, this was offset by high services income from tourism, which kept the current account balance fairly even.
Vanuatu claims an exclusive economic zone of 680,000 square kilometers and possesses substantial marine resources. Currently, only a limited number of ni-Vanuatu are involved in fishing, while foreign fleets exploit this potential.
In 1997 the government, with the aid of the Asian Development Bank, committed itself to a 3-year comprehensive reform program. During the first year of the program the Government has adopted a value-added tax, consolidated and reformed government-owned banks, and started a 10% downsizing in the public service. The program was derailed when Barak Sope became Prime Minister. Under Prime Minister Edward Natapei, reform programs have slowly been reintroduced.
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