Update on the Industrial Development Act review

There are serious private sector concerns about the Industrial Development Act No.19 of 2014 that the Department of Industry is implementing.

In late December 2014 and early January 2015, representatives of the Vanuatu Chamber of Commerce and Industry (VCCI) and the Vanuatu Manufacturers and Exporters Association (VMEA) met with the Department of Industry.

In these meetings, it was agreed by government representatives that the Act could not be implemented in its current form as there are many issues within the Act itself that needs to be corrected to ensure that local businesses, especially local ni-Vanuatu manufacturers and export businesses will not be affected.

In February and March 2015, a small working committee consisting of Department of Industry staff and several members of the VMEA and the VCCI met several times to review the Act. This committee made a major review of the Act. In early March 2015, it was agreed that it would not be possible to get all the very extensive amendments completed and consulted on before the March Parliament session. It was agreed to seek Ministerial support to repeal the entire Act. A totally new Act would then be introduced to the Second Ordinary Session of Parliament in 2015. If this was not acceptable then a minor amendment to repeal section 12 should be done. This minor amendment would remove the levy of up to 40% on exported goods that are not value added, which is causing an immediate problem for some export businesses. It would still be necessary to put major amendments or an entirely new Act through the Second Ordinary Session of Parliament in 2015. The Bills for both of these options (repeal and minor amendment) were drafted in early March, before Cyclone Pam.

Recent advice to the Department of Industry from the State Law Office (SLO) is that the Act cannot be repealed but that it is too late to get the proposed minor amendments before the first Session of Parliament for 2015.

The VCCI will continue to lobby for a minor amendment to the Industrial Development Act to go before the scheduled first parliamentary session in June 2015, as phase 1. It will continue to work with the Department of Industry to review, upgrade and finalize major amendments to the Act to go before the Second Ordinary Session of parliamentary session.

It is urgent to proceed with phase 1 now more than ever after the tropical cyclone PAM to concretely help and assist local businesses to rebuild themselves and maintain local employment. If no actions are taken at this level in phase 1, local manufacturing and exporters would question the purpose of having the Department of Industry under an Act that is not viable in the business environment. At a recent meeting at the VCCI premises, members of the VMEA stated that if the Act is fully implemented in its current form, many businesses will simply close their doors and migrate to our neighboring and competing countries that have friendlier business environment for businesses to operate. Many local businesses shared the same concern that the Act is flawed and needs to be reviewed.

Two members of the VMEA were contacted and asked whether their production have dropped and whether staff have been laid off as direct results from the implementation of the Industrial Development Act and cyclone Pam. Answers received are that production levels in the factories have dropped due to cyclone Pam. Staffs have not been laid off but are on rescheduled rosters whereby the number of hours worked have been reduced. Normal work schedules will be resumed when business operations get back to normal. One of the two local companies stated that if the Industrial Development Act is fully implemented in its current form then he will have no choice but to relocate to Fiji where the cost of doing business is lower and the business environment is friendlier.