INTRODUCTION

Mr. Chairman, Honourable and Honoured guests, Ladies and Gentlemen, I feel very honoured and privileged to address this assembly. I want to congratulate the planners of this conference for their efficient and graceful work. Thanks to their talent and dedication, we shall have fruitful exchanges of opinions, experiences, and suggestions here in Maui. Let me say simply – Aloha!

I will start with a very personal experience in the Republic of Vanuatu. From 1994 to 1998, I was hired as a consultant to help in establishing the Chambers of Commerce and Industry in Vanuatu, at the request of the Government of Vanuatu. This work was funded by the French Government, and it required my assistance to:

I would have liked to tell that story in full, but I will try to restrict this presentation to the issues of interest for this session. As I tell that story, which in many dimensions is unique, we will unfold some issues that may be of relevance in the interactions between Government and business associations in other Pacific island countries.

Historical

In the late 70's, the Chambre de Commerce (controlled mainly by French or pro-French businessmen) was one of the main lobbying groups against independence (1980). Immediately after independence, the first Prime Minister of Vanuatu, late Father Walter Lini dissolved it. In 1982, the PM asked one businessman to set it up again. It was again dissolved in 1985, then revived a little in the late 80's until another government, in 1994 decided to have a strong Chamber of Commerce. This is when our story begins.

There are roughly two models of institutional arrangements for the Chambers of Commerce:

• The Anglo-American model, which is based on a voluntary membership of businessmen, incorporated under "charitable organization" statute, fully independent from the State authorities in terms of rules, funding, etc.

• The Latin-German model, where Chambers of Commerce are statutory bodies, based on an automatic membership of all business license holders, who elect their Executive according to representative rules fixed by legislation. The Government collects an "extra-fiscal" fee from businesses, which is handed over to the Chambers of Commerce to fund their operations. What is interesting in this model is that the Chambers of Commerce can be representative of all sections of the business community. In Europe, they also are the main providers of professional training and vocational education.

In all Pacific island countries, the Chambers of Commerce are organized under the Anglo-American model, except, to my knowledge, in Vanuatu and in the French Territories of New Caledonia and Tahiti, where they are powerful and wealthy institutions.

Vanuatu is an archipelago, with 80 inhabited islands, with 80% of the businesses situated in and around Port-Vila. Around 80% of the population, though, live in rural areas, mostly on a traditional semi-subsistence horticulture basis, with cash income generated through sales of mainly copra, but also kava, coffee, cocoa, and other crops.

Most businesses, including commercial agriculture, livestock and fisheries businesses, are in the hands of citizens of Asian and European descent, and foreigners. Indigenous businesses, apart from agriculture and state owned enterprises, are mostly limited to taxis, buses, domestic shipping, and small retailing in remote areas. By the way, a small class of more sophisticated indigenous businessmen is emerging, still often sustained through Government contracts and purchases. Main business lobbies include the:

• Financial Center, domestic and offshore banks, with the accountants, lawyers, and other services associated with it.

• Tourism sector, comprising three main hotels and some smaller facilities and associated services.

• Agribusiness, mainly cattle breeders, with recent diversification into various horticultural productions; logging and fishing operations have not turned into large scale operations compared to other neighboring countries.

• Importers, wholesalers and retailers, mostly citizens from Chinese origin.

Interestingly, the main foreign exchange earner, copra industry, is not organized as a lobby. Small and medium sized farmers sell their production to the Vanuatu Commodities Marketing Board, which organizes sales and shipment to Asian and European markets. There is no industrial base, although some small manufacturing workshops operate in the timber, food, mechanical, maintenance, and various building-related businesses. Utilities are operated by subsidiaries of transnational corporations, with the Government as a shareholder. As you hear this, you will note that the picture very much looks like those in some other Pacific island countries, although the scale might be different here and there.

Establishing the Chamber of Commerce and Industry in Vanuatu

The terms of reference for setting the framework of the future Chamber of Commerce of Vanuatu were fixed through a first meeting I had with the Minister of Finance, then through a number of other meetings over the following three months in late 1994.

The new Chamber of Commerce should be a sustainable institution, which:

• Represents the various sections of the business community, with a fair say for indigenous and small, even "informal" businesses. Taking advantage of the fact that, even if foreigners control most assets and turnover, the number of indigenous people who hold a business license outnumbers the others by far.

• Encourages businessmen who do not usually cooperate because their interests tend to separate them (importers against local manufacturers, different ethnical, cultural and national backgrounds, typical local rivalries of small societies) to speak with a unified voice when Government requests them to express the views of the business community.

• Provides services (information, advice, and training) to its members, particularly to small indigenous businesses. The Chamber of Commerce should also assist in the creation of new businesses.

Such a framework was set up, progressively, through studying the business license files, meeting with a number of business people, organizing a committee to finalize the articles of a bill to be tabled in Parliament. Among other factors, consideration was also given to outer island needs, recognizing the fact that organizing meetings with scattered business people was expensive and not practical. Provincial Chambers of Commerce were to elect their Councils, which would send their representatives twice a year to a national meeting of the Chambers of Commerce. The Port-Vila Chamber of Commerce would run the National Chamber also.

Recurrent funding of the Chamber was to be based on a levy (2%) on the business license fees, with an initial grant from the Government of 10 million Vatu (US$ 80,000 at the time).

The Bill was passed in 1995, and the Minister of Finance was to appoint a provisional Council to be the first executive, before proper elections would be held the following year. The list of this first provisional appointed Council of 15 members was formulated and examined carefully. The Minister had also given me instructions about who should be the President (actually this was a subtle maneuver to attract this person and his political friends back on the Government's side as they had been backing opposition for a while). When his colleagues of the Council elected the President of the Chamber according to the Minister's wishes, I felt I had passed another of my assignments successfully!

From that moment, naturally, I turned from adviser to the Minister to adviser to the President of the Chamber. A few months later, after weekly meetings with the Council to set up a plan, a strategy and a few other theoretical and practical things, came the recruitment of a General Manager. The person chosen by the Council through a proper procedure was certainly the best candidate, but the trouble is that the Minister knew him as a member of an opposing political party. This was the beginning of the war...the Minister was so angry that he wanted me sacked!

Setting Up Office, Services and Programs

The next step was to establish current services, which were essentially informational and public relations in nature. That implies however a big workload, to get technical, commercial and economical information from all parts of the country and from overseas, then try to analyze, filter, check, make it coherent and useful, and disseminate in all directions to interested parties such as Government, businesses, overseas partners, etc. That sort of task, which I think is one of the most useful, comes in concurrence with what the Department of Trade has been doing for years, when no representative Chamber of Commerce was available. Of course the Chamber and the Department of Trade had to adjust their respective fields and procedures, and overlaps had to be trimmed. I found that working together with Government departments was more difficult than expected. The main reason for this is deeply entrenched in the feelings of many civil servants: Government is better than the private sector. Government cares for the people, while the business people care only for their own pockets.

The other reason looks more frivolous but is equally important. Until the Chamber of Commerce and Industry was set up, the Trade Officers used to seize opportunities to travel overseas on behalf of the business sector: meetings, conferences such as this one, trade shows and fairs, training sessions from international aid donors and agencies, etc. Now the Chamber of Commerce was competing on some of these assignments. One of the effects of this situation is that some information is retained by one side and not passed on to the other. It took more time than expected to adjust, and I believe it is not perfect yet.

Getting Small Indigenous Businesses to Take Part

It is not that easy to assist small and scattered indigenous businesses if they do not ask for assistance. One of the challenges of the Chamber of Commerce, as of many other business associations, is to help small operations to run more efficiently, and grow when possible. One of the ways is to offer training in matters where the need is obvious, such as in marketing skills and business skills.

So we developed training programs in these fields, but not like general thematic courses. Specific custom made programs would be directed to groups of businesses in the same industry. The training would also involve organizational and lobbying features.

One of the programs was directed to those very small island resorts that indigenous people try to run all around the Pacific. Usually an individual and family, sometimes a village community pushed by some young entrepreneurs, may build bungalows and a kitchen-restaurant, with technical assistance from passing travelers, and perhaps financial assistance from an embassy's discretionary fund. Then they would wait for tourists to fly down from the sky. An application is then made for a telephone line, which might, with luck, come within the next two or three years. As an after thought a relative in the public service is asked to draft, type and photocopy a hundred pamphlets to say how beautiful and welcoming their resort is. The pamphlets would sit at some local tour operators office for ages, and no tourists would come.

The Chamber of Commerce organized a workshop for the owners-managers of these very small resorts. My feeling is that most of those people who undertake new ventures in the difficult circumstances of the rural traditional environment have the basic required energy and strength to succeed in business. Ten of such people came to Port-Vila, and listened to advice from airline operators, travel agents, experts, hotel managers, and Government officials. They asked questions, and were not very sure whether they understood the answers. Then after three days I asked them if they were ready to form a business association to market their products together and improve their skills together. They all immediately put on the table the $20 that I requested as a first commitment to such an association.

Later, we incorporated a company jointly owned by this "Island Bungalows Association", the Chamber of Commerce, and the national domestic airline. The company (Island Safaris) was to be their specialized marketing arm and inbound tour operator. Thanks to a very professional technical adviser, this company will yield more than $300,000 sales in 1999. Now the association consists of 19 members, and sits on the Board of the National Tourism Office. It might ultimately buy shares and gain a seat in the board of the national domestic airline.

Another training program was initiated and run by the Chamber of Commerce in the building industry. Typically, a number of Pacific islanders do possess the basic skills to organize and build simple buildings of wood or concrete, like sheds, primary schools and simple housing. Most of them cannot access Government contracts for lack of basic tendering skills. A number of favorable factors converged and was decisive in the development which followed: the Public Works Department decided to contract all Government building activities to the private sector; and the European Union was funding a large program of building new schools in Vanuatu over the next five years. The Chamber of Commerce embarked on the design and implementation of a specific training program, which would equip small builders with the skills to estimate costs and timing, tender their bids, and run works efficiently. More than forty small builders have gone through training in urban and rural areas. This modular training program has been developed continuously over the last three years, with good local results.

However, assessments of effectiveness of the program over the first two years have shown some disillusionment by some builders who complain that tender procedures were not followed and influenced by political favoritism.

Why do I focus on these examples? I do so because they illustrate the importance of the consultation process with Government in important areas such as:

• Infrastructure development priorities –
  How does the Government take business needs into account in its investment program? There is no point, for instance, in setting up a tourism operation in some place where there is no telephone or airport.

• Transparency in public money management –
  If procedures are not clean and transparent, business improvement is discouraged.

• Consistency of sectoral policies –
  How does the Government weigh the benefits of synergies and complementarities in development policies?

• Strength of sectoral associations of small business in addressing problems that each one of them cannot solve, including in their relationship with Government.

The experiences which the Chamber of Commerce in Vanuatu went through raise other issues.

The Government, aided by the Asian Development Bank, started formulating a structural reform and adjustment program in 1997. Drafting the program took several months. The Chamber of Commerce was recognized as a partner in consultations, because a "private sector-led growth" is given emphasis in the program.

During this time, the Chamber of Commerce and Industry of Vanuatu pushed strongly for more transparency in Government procedures, and insisted that the Government table and pass a Bill on the Leadership Code, which had been neglected since Independence. The Bill contains a provision that every "Leader" must disclose his/her income, assets and liabilities once a year to the Clerk of Parliament who will have it published in the National Gazette. The enacted Bill had a very wide definition of a "Leader", which included members of the Council of the Chamber of Commerce.

So in February 1999, after unsuccessful attempts to challenge the interpretation, at a time when waiting longer to disclose their assets and liabilities would breach the law, the Council members and the General Manager of the Chamber of Commerce resigned collectively.

Most Government officials and politicians were quite happy to say that the business people were being caught in their own trap...transparency in business was worth promoting! Similar standards should be imposed on businesses, they said.

The consultation process is to resume soon, though, as the Leadership Code has been amended and disclosures of assets and liabilities will be kept secret in the safe of the Clerk of Parliament.

In many dimensions this story shows some of the tunnel vision that the Government (including many public servants) has of the business sector.

Governments are generally aware that business associations may have better skills than the Public Service to develop the market economy and foster growth in income, employment and revenue. But they do insist that sovereignty and preeminence of the political power are not tradable; as soon as the Government perceives a threat to its perogatives or a slight divergence of opinion from the official line coming from the business community, then the business people must be reminded of where the center of power is.