Productive investments and infrastructure investments PARMOD ACHARY VANUATU NATIONAL PROVIDENT FUND

OUTLINE VNPF BACKGOUND-INSTITUTIONAL INVESTOR INVESTMENT BACKGROUND INVESTMENTING IN INFRASTRUCTURE FOR ECONOMIC GROWTH

VNPF ASSET ALLOCATION The Chart below shows the current asset allocation for 2018. Equity is still above the required range while we have improve our allocation towards cash however, for Fixed income we are little over the VNPF guidelines.

PERFORMANCE FOR LAST 5 YEARS BY EACH CLASSIFICATION

Fixed Income Portfolio 2018 The Fixed income portfolio includes the Fixed Term Deposits (61%), the Government bonds (33%) and the Foreign Currency Fixed Term Deposits (6%).

Interest Rates The diagram below shoes the movement in interest rate over a 10 months period. While Credit Cooperation (Vanuatu) Limited (CCVL) is offering up to 4.5% which is the highest, CCVL’s appetite for VNPF Term Deposit is only up to VT250 million and will only rollover to keep this balance. NBV is offering a reasonable interest rate given the market situation however the VNPF exposure to NBV is quite substantial. Average Return on Fixed Term Deposits is around 3.66%. Excess liquidity is still a threat to this portfolio as it drives down interest rates.

Term Deposits In October 31, 2018 Total Term Deposits increased by 25%. With the excess liquidity in the system, Banks are offering less than 1% to 1.9% for a placement of VT200 Million for a term of 720 Days. In some cases no bids were received for tender. The Graph Below shows that Terms Deposits have increased in 2018 compared to year 2017.

LIQUIDITY STORY With the excess liquidity in the system, Banks are offering between 1% to 1.9% for a placement of VT200 Million for a term of 720 Days. In some cases no bids were received for tender.

INFRASTURUCTURE FOCUS FOR VNPF WHAT IS INFRASTRUCTURE The concept of infrastructure was probably introduced for the first time by Singer (1950) who identified investment in infrastructure with investment in certain facilities that are regarded as necessary for development. According to Hirschman (1958), infrastructure consists of those basic facilities without which primary, secondary and tertiary activities cannot function. These facilities play an important role in creating investment opportunities in other industries.

VANUATU INFRASTRUCTURE Programming priority investment projects under VISIP 2015   Project Estimated Cost Estimated Timing Vanuatu Urban Development Project (Phase 2 - - Luganville, Port Vila) 2.1 2017-2021 Efate Grid Connected Solar Panels (1 MW) Project 0.523 2016-2018 Luganville Existing Water Supply System Rehabilitation 0.383 2016-2017 Brenwe Hydro Power Project (<1.2MW), Malekula Sarakata Hydro Power Extension Project (+600KW), Santo 0.397 2017-2018 Grid Extension (Matevulu to Shark Bay, Port Olry, Stone Hill and Palekula), East Cost Santo 0.224 National Diagnostic Laboratory Bureau of Standards 0.56 2017-2019 Sealing of Tanna Roads Whitegrass to Isangel 0.467 Implementation of iGov Strategic Plan including planning of WB/ADB ICT loan package 1.881 2018-2022 New Government Data Centre + Backup 0.093 2018-2019 South Santo Coast Rehabilitation 2.39 2019-2023 4 Provincial capitals Water Supply System Development 0.09 2019-2020 Malekula East Coast Road Rehabilitation 2.931 2019-2024 Upgrading Airports of Category A 1.764 2019-2022 Domestic Jetties Construction in Every Province 0.486 2019-2021 Expansion of Government Broadband Network (GBN), Phase 2 (more connectivity in provincial capitals and towns) 0.187 Luganville Solid Waste Management 0.14 Rehabilitation and Extension of Luganville Intenrational Wharf 5 Upgrading Airfields of Category B 0.263 2020-2021 Low Voltage (LV) and Medium Voltage (MV) extension [Vila, Santo, Malekula] 1.68 2020-2023 Road Rehabilitation and improvement in Every Province 1.862 Rural and Feeder Roads Rehabilitation and Development in Every Province 2.31 2020-2024 Rural Water Supply Lamap, East Malo, Wala Rano, West Ambae Rural Water Supply in Every Province 0.047 2021-2022 Reconstruction Malapoa College 1.494 2021-2024 New Proposed Privately Financed Investment Project Takara Geothermal Power Plant (4+4MW) Preparatory Study & Invetsment 10.082 2016-2024

Public Infrastructure Projects

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THE ECONOMIC & SOCIAL POLITICAL ECONOMICAL SOCIAL TECHNOLOGY DEMOGRAPHICAL GLOBALIZATION

POLITICAL& LEGAL TYPES OF INVESTMENTS STABILITY CHANGING FOCUS RESTRICTIVE LEGISLATIONS

ECONOMICAL Around 80% of the population involved in subsistence farming are not given the opportunity to participate in the economic growth and share in the benefits When targeting poverty reduction, Geographical targeting at the level of the village or the urban community reduces the leakage of benefits to the non-poor. Not all poor people live in the village.

SOCIAL Vanuatu’s major problem is its incapability of transforming the subsistence communities (comprising of 80% of population) with their rich traditional and cultural values into a more commercially oriented sector if the economic aspirations of the population are to be realized and achieved.

TECHNOLOGY Distribution of Technology into the Islands is costly given that the Islands are scattered. Thus the marked prices of products are high.

GLOBALIZATION For Vanuatu and other PICs the most important challenge is developing a better understanding of its likely impacts, consider the most realistic options and adapt to its challenges.

DEMOGRAPHICAL Vanuatu’s islands are widely dispersed in a Y-shaped archipelago, stretching some 850 kilometers. Marketing of agricultural products is constrained by the frequency, type and cost of inter-island shipping. The main islands in Sanma, Shefa, Malampa, Penama and Tafea (only Tanna) provinces receive regular shipping calls. Other islands, particularly Torba province are served very infrequently (sometimes it takes months for Torba) due to economic reasoning.

VNPF INVESTMENT IN INFRASTRUCTURE ELECTRIFICATION Shares in UNELCO SOLAR Farm SANTO New Solar Farm Shares in operating company Control the Production Of Electricity

ELECTRIFICATION UNELCO Farmers Govt. Subsidies VNPF Coconut Oil Manufacturers

TOURISM AIR VANUATU SHARES IN AIR VANUATU OWN 5 STAR HOTELS/ INTERNATIONAL OPERATORS

TOURISM VNPF members 5 star hotel Farmers AVL

Food Processing/ Operator VNPF (Owner) Farmers Members of VNPF AGRICULTURE