Vanuatu’s revised investment laws
Key Points
The draft Investment Promotion and Facilitation Bill 2018 (“Bill”) has been finalised and is ready to be tabled in Parliament, once passed it will replace the existing Vanuatu Foreign Investment Promotions (Cap 248) (“VFIP Act”).
The Bill will introduce a multitude of changes to investment rules, especially around restricted and reserved activities and the methods in which such activities are category.
Although, the changes herald new levels of transparency and clarity, they come with additional regulatory oversight and it remains unseen whether the changes will improve the policy issues faced in Vanuatu.
The Bill also is set to come alongside changes to the foreign investment application process which commenced in July and requires investors to disclose additional information in an attempt by VIPA to deal with policy issues faced in Vanuatu such as skill retention problems.
Introduction
The new foreign investment law is expected to come into force soon in Vanuatu as the draft Bill has been finalised and is ready to be tabled in Parliament.
The Bill, should it pass into law, will repeal the existing VFIP Act and will provide provisions for the transition of existing activities regulated under the current law.
The Bill is a substantially re-written version of the VFIP Act, that intends to better accommodate investment growth in Vanuatu and to more clearly define guidelines and procedures. Some of the key changes under the Bill, include:
revised functions of the Vanuatu Investment Promotion Authority (VIPA) with a more focussed mandate to promote and facilitate investment, such as increased transparency through annual and biennial reporting requirements, and a direction to not only assist foreign investors but also to develop methods that will in essence facilitate easier foreign investment;[1]
Reserved and Restricted Lists are revised and will now be open to revision regularly; and[2]
increased public scrutiny and openness by introducing public consultations in the review of the Reserved and Restricted Lists.[3]
What to expect
The Bill aims to set out a clear framework within which investment, whether local or foreign, can be encouraged. However, it will remain unclear whether the outcomes envisioned by this revision come to fruition until the Bill comes into law.
What does appear certain is that the Bill will enable a more active and dynamic national investment policy because Reserved and Restricted Activities will now be open to amendment. The Bill will require VIPA to conduct reviews of the Reserved and Restricted Lists every two years through public consultations to ensure the lists of activities accurately reflect the policy goals of the incumbent government and the requirements of the domestic market place. Reflecting this new found openness to the public’s needs, an individual may even request a review to be conducted.[4] Although, such a review requested by a member of the public will only be conducted at VIPA’s discretion.
It is important to note that if an investment activity is later added to the Reserved or Restricted List, a foreign investor who is already registered and engaged in that activity may continue operating. Meaning, that under the Bill, periodic reviews of the Restricted and Reserved Lists will not unfairly impact on currently established businesses, rather the changes would only affect incoming investors.
From commencement, the Bill will also introduce some changes to the Reserved and Restricted Lists, including a number of activities moving from the Reserved List to the Restricted List, and two new additions to the Reserved List. A full breakdown of the changes to the Prohibited, Reserved and Restricted List is provided in the table below:
The Bill also extends the investment guarantees to ensure that foreign investors are treated no less favourably than their domestic counterparts.[5] This guarantee functions alongside the guarantee against the illicit expropriation of property and free transfer of funds outside of Vanuatu which intend to give foreign investors the peace of mind to freely invest in Vanuatu without fear of having their property coercively acquired or trapped in Vanuatu.[6] .
The Bill also streamlines the processing time for new applications, requiring that VIPA provides notice of approval or lack thereof to an applicant within 10 days, rather than the previous 30 days approval period.[7]
However, the Bill will also creates additional hurdles for larger investments, for example where an investment being proposed is valued in excess of VT1 billion (approximately USD10 million), Ministerial approval is required.[8] The Bill also clarifies the circumstances that may lead to any amendments or cancellation of the registration of an investment activity setting out a list of practices that may affect registration.[9]
Other changes outside the Bill
In June 2018, VIPA also endorsed some changes to the foreign investment application process.[10] The prescribed forms for the Foreign Investment Application Certificate (“FIAC”) were reviewed and amended to require additional information with the aim to collect more relevant data on the investment activities undertaken in the country to improve policy decision-making.
Investors will also be required to complete a New Business Plan Template which has been prepared by VIPA to guide the investors towards the relevant information that will be required when assessing the value and quality of FDI that the proposed investment will bring into the country.
The changes intend to deal with skill retention and policy issues present in Vanuatu. When placed alongside the Bill, the changes to the application process create a suite of developments geared towards clarifying what is required of investors while, also creating a more transparent and investor-friendly environment. However, with the introduction of review provisions for the Restricted and Reserved Lists, the Bill should provide VIPA the tools necessary to react to pertinent policy issues in Vanuatu as they change and evolve.
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[1] Investment Promotion and Facilitation Bill 2018 ss 3(a),(f),(i).
[2] Investment Promotion and Facilitation Bill 2018 ss 17, 20, 27.
[3] Investment Promotion and Facilitation Bill 2018 ss 21, 28.
[4] Investment Promotion and Facilitation Bill 2018 ss 22, 29.
[5] Investment Promotion and Facilitation Bill 2018 s 55.
[6] Investment Promotion and Facilitation Bill 2018 ss 54, 56.
[7] Investment Promotion and Facilitation Bill 2018 s 43; Vanuatu Foreign Investment Promotion Act (Cap 248) s 20.
[8] Investment Promotion and Facilitation Bill 2018 s 42(6).
[9] Investment Promotion and Facilitation Bill 2018 s 49(1).
[10] http://www.investvanuatu.org/wp/vipa-makes-changes-application-processes/
