John Howard, Vanuatu Reserve Bank pioneer
The death has been announced of John Howard who set up the Central Bank of Vanuatu at Independence and did much to ensure the smooth transition of Vanuatu's tax haven from Condominium times, to the Republic.
Daily Post here speaks to Vanuatu's first Finance Minister, Kalpakor Kalsakau, who pays a tribute to John Howard. Howard assisted him in ensuring the new country was always able to produce a surplus in the economy in its early years.
We asked how Kalpakor and John first met.
Kalsakau: In 1979, prior to Independence, I was working on ideas for the finanial policies of the new Republic and ultimately I was going back and forth between London and Paris and then Washington. And it was in Washington that the International Monetary Fund (IMF) suggested I ask the Bank of England for assistance in drafting legislation for the setting up of the Central Bank (as it was first designated) in Port Vila.
In London the Governor of the Bank of England was delighted to assist and said he had three young people who helped him in all manner of things, and if I liked to make a choice, he would lend me one of them. That is how I came to choose John Howard, and it was the first time we met. John came out to Vanuatu just before Independence.
I was also working with the Institut d'Emission d'Outre-Mer in Paris and asked them whether they could produce a deputy for the general manager of the Central Bank and they, too, were delighted to assist. They simply did it.
The initial task was to get the Central Bank legislation in place and working well, and, after many long sessions and late nights, we did. We then had to take the Bank, as it were, to the IMF and this needed much more work starting in 1980 to transform the country's chief financial institution into the Reserve Bank.
We continued to work from the old French premises of the Trésor (VFSC now), and remained there until the Reserve Bank was built on the site of the old Joint Court. But there was all the problem associated with having the two currencies prior to Independence. There was no difficulty with the New Hebrides franc, but the Australian dollar was another matter. And a tricky one for John and me. I had to sort it out with the Australian Treasurer, another John Howard! - he who went on to become Prime Minister of Australia.
It was the Australian Treasury which proved difficult because of the Vanuatu tax haven. Australian Foreign Affairs had no difficulty, but for the Australian Treasurer it was another matter. And there were many dollar accounts in Vanuatu and many dollars in circulation.
Vanuatu's British John Howard was very helpful in getting our special drawing rights (SDRs) for a currency to be called the vatu sorted out with the IMF. We had to have the coins designed and manufactured, and the art work done for the notes. We settled on agriculture and tourism as the main designs for the notes, and John found someone who could do the artwork. And then there were the containers of money arriving, and the VMF escorting all this wealth to the bank premises in 1981.
However, the monetary role of the Bank, and the micro- and macro-economic policies continued to occupy John Howard and myself for a long time. On the one hand there was the largely rural economy, and then there were the service industries of the towns. It was a two-tier economy. There was an informal economy and a formal one.
John and I would bounce ideas off each other. We were always together. And there were the advisors in the Ministry of Finance. Yes, we had sleepless nights, but the country was always in surplus and we easily established Vanuatu as the premier tax haven of the South Pacific. John Howard knew how and why our Finance Centre was set up and how to make it work. He knew how such jurisdictions had been made to work in the Caribbean. My main advice to him concerned local employees and making sure they received adequate remuneration. Unless they did so, I said, there will be problems. Employers - the banks - everyone was frightened of anything new. John willingly took my advice. It has worked.
One of John's biggest achievements was in making the foreign currency surplus really work for us. It ran very well indeed. The rest of the South Pacific was in deficit. They'd make copra, and month by month they'd have to decide whether they had enough foreign currency to buy their rice and tinned goods.
At Pacific finance ministers' meetings I'd be asked how we managed to be so financially successful. I could only point the ministerial colleagues in places like Samoa, the Cooks and Nauru to our tax haven system which those countries have subsequently operated, but with varying degrees of success. In fact John Howard went to Samoa after fulfilling two contracts here in Vanuatu.
Then, for us, there was the shipping registry established with an elderly American who subsequently died. Together with him we had planned to have cruise ship registration, but on the death of this man, he who took over the registry quickly adopted a different path. John Howard also cleared the way for insurance and gaming for us. And he made sure the finance centre operated correctly.
John held firmly to the principle of the House of Lords that every single individual has the right to minimize his tax. No-one is entitled to avoid it, but everyone should be able to minimize it. We used to maintain that concept. John and I discussed it many, many times.
The Howards and Kalpakor Kalsakau remained in touch over the years. They lived on the Gold Coast in Queensland and visited on several occasions. In fact, Kalpakor had heard from them quite recently. They were planning a return ship visit to Vanuatu which would have brought them here around the time of John's death.
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