Vanuatu Compact

Policies Matter: Reforms Bring Progress in Vanuatu

This additional expertise is strengthening maintenance management of not only the MCC-funded roads, but Vanuatu’s entire road network.

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Vanuatu’s Road to Economic Growth

The $65.69 million compact with the Government of Vanuatu rehabilitated two critical roads on Efate and Santo Islands, Vanuatu's two largest islands. The 149.7 kilometers of rehabilitated roadways have become gateways to economic growth and community activity.

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In March of 2006, the Millennium Challenge Corporation signed a five-year, $65.69 million compact with the Government of Vanuatu to reduce poverty and stimulate economic growth by targeting the country’s poor transportation infrastructure. The compact will benefit poor, rural agricultural producers and providers of tourist related goods and services by reducing transportation costs and improving the reliability of access to transportation services. The compact in Vanuatu entered into force (EIF) in April 2006, formally initiating the five-year timeline for project implementation. The compact closed out in April 2011.

The compact was formally restructured in early 2008 due to several circumstances including escalating global construction costs and currency fluctuations. The construction and sealing of two national roads, the Efate Ring road and the Santo East Coast road, is the focus of the restructured Compact. In June of 2009, the Government of Vanuatu signed a funding agreement with the New Zealand Agency for International Development (NZAID) to provide additional funding support to the project.

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as of September 30, 2011

  •  Total Grant Value:
    $65,690,000
  •  Total Amount Committed:
    $65,092,243 (99%)
  •  Total Amount Expended:
    $65,092,243 (99%)
    Expenditures are the sum of cash outlays and quarterly accruals for work completed but not yet paid or invoiced.
  • Signed:
    March 2, 2006
  • Entry into Force:
    April 28, 2006
  • Program Completed:
    April 28, 2011

This program aims to benefit poor, rural agricultural producers and providers of tourist related goods and services by reducing transportation costs and improving the reliability and of access to transportation services.

  • Reconstruction of two priority transport infrastructure projects: the Efate Ring road and segments of the Santo East Coast road;
  • Strengthen institutional efforts and reform and policy reforms initiatives and build capacity within Vanuatu’s Public Works Department, through the provision of plant and equipment for maintenance; introduction of service performance contracts;  and the establishment of local community road maintenance schemes. 
  • Project Amount: $60,160,000.00
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  • November 7, 2004

    MCC Board of Directors selects Vanuatu as eligible for Compact assistance

    The MCC Board of Directors selected Vanuatu as one of the 16 countries eligible for MCC funding in 2005. In making its determinations, the Board considered both past and current policy performance of the candidate countries in the areas of democratic governance, economic freedom and investing in the health and education of their people. The Board also considered trends that indicated policy improvements or slippage.

  • March 30, 2005

    MCC receives Vanuatu proposal to address poor transportation infrastructure

    MCC received the country proposal for the MCA program to increase economic growth in the outer islands by overcoming transportation infrastructure constraints to development.

  • January 2, 2006

    MCC Board approves Vanuatu Compact

    The MCC Board of Directors approved a five-year, $65.69 million Compact with the Government of Vanuatu. The MCC program is expected to increase average income per capita by 15 percent within five years and directly impact the lives of more than 28,468 people living within five kilometers of the Efate Ring Road and the Santo East Coast Road.

  • March 1, 2006

    Vanuatu Compact signed

    The Millennium Challenge Corporation signed a five-year, $65.69 million Compact with the Government of Vanuatu to reduce poverty and stimulate economic growth by targeting the countryÍs poor transportation infrastructure. The Compact will benefit poor, rural agricultural producers and providers of tourist-related goods and services by reducing transportation costs and improving the reliability of access to transportation services.

  • April 28, 2006

    Vanuatu Compact enters into force, starting the five-year implementation clock

    Entry into force signals the beginning of the implementation phase and five-year countdown of the program.

  • May 31, 2006

    Governance Agreement signed

    In May of 2006, the Governance Agreement was signed, specifying the organizational structure of MCA-Vanuatu and the respective rights and duties of its Steering Committee and Management Unit.

  • June 1, 2006

    MCA-Vanuatu and MCC approve Monitoring and Evaluation Plan

    In June 2006, the MCA-Vanuatu Steering Committee and MCC approved the Monitoring and Evaluation Plan for the Compact program.

  • June 15, 2006

    Initial disbursement

    MCC approved the first disbursement of $1.5 million in Compact funds.

  • October 31, 2006

    Implementing Entity Agreement signed with the Vanuatu National Statistics Office

    The Implementing Entity Agreement with the Vanuatu National Statistics Office was signed. The Vanuatu National Statistics Office agreed to undertake survey and data collection activities related to the Transport Infrastructure Project.

  • November 30, 2006

    Vanuatu National Statistics Office conducts income survey

    The Vanuatu National Statistics Office conducted a National Household Income and Expenditure Survey, partially funded with compact funds, in order to develop more reliable measures of cash income and establish a national poverty line, defined as the ñBasic Needs Poverty Line.î Baseline poverty and income measures that had not been previously available were established in order to support measurement of program impact.

  • May 1, 2007

    Vanuatu increases road maintenance budget Vanuatu increases road maintenance budget

    As set forth in the Compact, the Government of Vanuatu agreed to provide appropriate budgetary resources for road maintenance. The 2007 national budget contained an increase of 500 million Vatu (or approximately $5 million) to the Public Works DepartmentÍs budget for road maintenance.

  • June 11, 2007

    Tourism survey contract and AusAID MOU signed

    MCA-Vanuatu signed the contract for completion of a tourism survey. This survey will provide key baseline data indicators on tourismÍs contributions to income generation and employment within Vanuatu. Additionally, a memorandum of understanding was signed between MCA-Vanuatu and the Australian Agency for International Development (AusAID) for the provision of up to $288,000 to assist with the financing of the tourism survey, a critical element under the Monitoring and Evaluation Plan.

  • June 15, 2007

    Invitation for bids released

    The invitation for bids was released for the design and build contract for all eleven sub-projects within the Transport Infrastructure Project. This included roads, wharves, warehouses, and an airstrip. It also included the supply of road building plant and equipment. Bids were expected to be in the range of $50-$57 million.

  • September 1, 2007

    Creation of Engineering Support Unit

    The Vanuatu Public Service Commission approved the creation of an Engineering Support Unit within the Public Works Department for supervision of Transport Infrastructure Project and as a permanent strengthening of road maintenance capacity.

  • December 11, 2007

    Invitation for bids annulled

    After the bids received for the design and build of all sub-projects came in at approximately three times the project amount, MCC, the Government of Vanuatu and MCA-Vanuatu recognized that rising construction and fuel costs, as well as changes in currency exchange rates, made proceeding to negotiation impossible. The procurement was annulled and an evaluation process began to address the funding shortfall.

  • December 11, 2007

    Implementing Entity Agreement signed with Public Works Department

    The Implementing Entity Agreement with the Public Works Department outlining the roles and responsibilities of MCA-Vanuatu and the Public Works Department in the implementation of the Transport Infrastructure Project.

  • January 31, 2008

    Compact re-scoping

    In early 2008, MCC, the Government of Vanuatu and MCA-Vanuatu recognized that these constraints and delays in mobilizing implementing entities and contractors limited MCA-VanuatuÍs ability to implement the Transport Infrastructure Project within its allocated budget and timeline. MCC, the Government of Vanuatu and MCA-Vanuatu underwent a joint exercise that reviewed several options for re-scoping the Transport Infrastructure Project. The Government of Vanuatu and MCA-Vanuatu proposed to modify the project by focusing on the construction and sealing of the two largest high-priority national roads, the Efate Ring Road and portions of the Santo East Coast Road. MCC conducted revised economic rates of return (ERR) on the modified scope of the Compact, confirming that the revised ERRs for the Efate Ring Road and Santo East Coast Road continued to exceed hurdle rates.

  • February 29, 2008

    Contract for supervisory engineer signed

    MCA-Vanuatu signed a contract for supervisory engineering services with Queensland Consulting Project Partners Pty Ltd.

  • May 1, 2008

    Design & build contract signed

    MCA-Vanuatu signed a $54 million design and build contract with Downer EDI Works from New Zealand for the design and construction of the Efate Ring Road and portions of the Santo East Coast Road.

  • June 1, 2008

    TRIP consultants deliver the "MCA Tourism Survey Baseline Study Final Report"

    Results of the Tourism Study Baseline Survey, conducted from June 2007 to June 2008, were summarized and presented to MCA-Vanuatu and MCC. As per the contract terms of reference, the data collected was intended to measure the industryÍs contribution to the Vanuatu economy and household welfare. It was also intended to track over time how that contribution changes and examine how changes in transportation infrastructure and services affect the development of the tourism industry, as well as the local income and employment derived from it.

  • June 1, 2008

    Efate Ring Road groundbreaking

    Preceded by a large national ceremony, groundbreaking on the Efate Ring Road commenced in June 2008.

  • August 1, 2008

    Environmental and Social Management Plans completed for Efate

    The initial Environmental and Social Assessment and Environmental Management Plans for Efate are completed. These plans were utilized for oversight and monitoring of issues throughout the duration of the Transport Infrastructure Project.

  • November 30, 2008

    Environmental and Social Management Plans completed for Santo

    The initial Environmental and Social Assessment and Environmental Management Plans for Santo are completed. These plans were utilized for oversight and monitoring of issues throughout the duration of the Transport Infrastructure Project.

  • December 14, 2008

    Trial section of Efate Ring Road complete

    A trial section of pavement was completed, sealed, and tested on the Efate Ring Road. The Resettlement Action Plan (RAP) for Efate Ring Road was completed and posted on MCA-VanuatuÍs website. The RAP was implemented as part of the Transport Infrastructure Project.

  • April 1, 2009

    Santo RAP completed

    Resettlement Action Plan (RAP) for Santo East Coast Road was completed and posted on MCA-VanuatuÍs website. The RAP was implemented as part of the Transport Infrastructure Project.

  • April 30, 2009

    Groundbreaking for Goodwill Highway

    Work commenced at a groundbreaking ceremony for the upgrade of the Santo East Coast Road. The ceremony was held on the historic site of a U.S.-constructed World War II airstrip at Matevulu.

  • May 14, 2009

    Efate tourist and market amenities

    A SHEFA Province Tourist Amenities Taskforce meeting was held to coordinate tourism development with the road construction work. This heralded more coordination between MCA-Vanuatu and the provincial government and resulted in the inclusion of places for buses, taxis and public transport trucks to park clear of the traffic lanes while passengers get on and off at scenic lookouts, places of interests, and to shop at a series of local roadside markets funded by the province.

  • June 10, 2009

    Government of Vanuatu signs agreement with New Zealand Aid Program

    On June 10, 2009, the New Zealand High Commissioner signed an agreement with the Government of Vanuatu for the New Zealand Aid Program to provide a financial contribution of NZ$14 million (equivalent to $9.4 million) toward completing the road construction works under the MCA-Vanuatu program.

  • September 3, 2009

    Efate Ring Road visit by Acting U.S. Ambassador to Vanuatu, PNG, and the Solomon Islands

    After meetings with MCC andæMCA-Vanuatu and discussing Compact progress and future opportunities with the Prime Minister, Acting Ambassador Paul Berg went on a tour of the Efate Ring Road.æ Mr. Berg was impressed with the teamwork and diligence demonstrated by MCA-Vanuatu, particularly their attention to safety, environmental and social concerns.

  • October 1, 2009

    Final designs completed

    The final designs for the roads were completed and approved by MCA-Vanuatu.

  • February 2, 2010

    Celebrating the halfway point

    On February 3, a ceremony was held on Santo to celebrate significant milestones with the road reconstruction work. A ceremony was held on Efate on February 4 marking the completion of the halfway point _ or 48 kilometers _ of road. The events included participation from U.S. Ambassador Teddy Taylor, President of Vanuatu Iolu Abil, Prime Minister Edward Natapei, and New Zealand High Commissioner Jeff Langley.

  • June 28, 2010

    Road safety poster competition

    An exhibit was held featuring road safety posters created by local children, or pikinini, from areas associated with the Efate Ring Road and the Santo East Coast Road were held. The Santo East Coast Road posters were displayed in a bank building in Luganville on Santo. The Efate Ring Road posters were displayed in the French EmbassyÍs cultural center, the Espace Culturelle in Efate.

  • July 1, 2010

    Roadside markets open in north Efate

    Taking advantage of the new road, the Shefa Provincial Government helped finance and build eleven roadside markets to help village women sell their goods to tourists and locals passing by.

  • August 4, 2010

    Vanuatu hosts 41st Annual Pacific Islands Forum

    The 41st Pacific Islands Forum was held in Port Vila, Vanuatu, August 4-5, 2010. Leaders of the forum acknowledged Vanuatu's 30th anniversary of independence and congratulated Vanuatu of this significant landmark in its statehood.

  • August 12, 2010

    Santo East Coast Road width increased

    Minister for Finance and Economic Management Sela Molisa, United States Ambassador to Vanuatu Teddy Taylor and New Zealand Minister for Foreign Affairs Murray McCully announced that the seal width for the entire length of the upgraded road on Santo will be increased from five meters to six meters. This additional cost of $648,000 was covered through cost savings realized through collaboration, goodwill and good management of the project.

  • September 1, 2010

    Vanuatu National Statistics Office Initiates 2010 National Household Income and Expenditure Survey

    The Vanuatu National Statistical Office initiated the National Household Income and Expenditure Survey for 2010 as a follow up to the survey in 2006, to estimate the actual rise in income and reduction in poverty of targeted beneficiaries over the life of the Compact.

  • September 23, 2010

    MCA-Vanuatu initiates road traffic counts

    Small teams began counting the traffic travelling on the road at locations around the Efate Ring Road and the Santo East Coast Road. This work is being carried out by MCA- Vanuatu and SHEFA PWD. It is part of the monitoring and evaluation of the project and is necessary to gain information for road maintenance purposes. Traffic was counted at designated traffic monitoring sites between 5:00 am and 9:00 pm for a seven-consecutive-day calendar period for each event. Following the completion of the roadsÍ rehabilitation work, traffic counts were conducted in September 2010, December 2010 and February/March 2011. During the February/March 2011 traffic counts, an Origin and Destination Survey was conducted to help determine improvements in mobility and travel time ratios as a direct result of road works.

  • September 30, 2010

    Road safety awareness sessions held for children

    In conjunction with constructing a short length of pavement at the base of KlehmÍs Hill, road safety awareness for children sessions were held at both the Mele primary schools. Training sessions were conducted on both roads and in every school and village from 2009-2010. Road safety teaching materials have been developed in English and Bislama and were delivered to every school along both roads in 2009 and 2010. The materials have been made available to the Ministry of Education for wider use. The traffic survey was completed and the results reported to MCC. Village women were employed to plant grasses along roadsides to prevent erosion and promote sustainability. Among the women are students whoætook up this opportunity for employment during their school holidayæand earn someæmoney for their school needs.

  • October 1, 2010

    Maintenance manager hired to ensure sustainability of road assets

    MCA-Vanuatu recruited an International Road Asset Maintenance Manager to work directly with the Public Works Department on maintenance management plans and budgeting for more effective implementation and management of road assets.

  • October 7, 2010

    Goodwill Entitlements delivered to affected residents

    Through the Goodwill Entitlement program, MCA-Vanuatu delivered a series of seedlings to people who lost trees and crops as a result of the road construction.

  • November 24, 2010

    Road works complete

    All the major work, including sealing, was completed on the Santo East Coast Road and Efate Ring Road.

  • January 31, 2011

    TRIP consultants deliver the "MCA Tourism Survey Baseline Study Final Report"

    "Salient findings of the February 2011 draft report of the MCA-Vanuatu "Tourism Survey Final Study," prepared by TRIP Consultants, includes information such as:
    • The total estimated 2010 tourist expenditure is equivalent to $221.19 million (20.655 billion vatu).
    • There are approximately 4,000 fulltime employee equivalents attributable to tourist spending.
    • Approximately $46.05 million (4.3 billion vatu), or 21 percent, of all tourist expenditure is spent on local transport.
    • The contribution to GDP from tourism (direct plus indirect) is approximately 19 percent."

  • April 11, 2011

    Compact closure celebrations

    Celebrations marking the conclusion of the compact were held on Efate and Santo. Senior members of MCCÍs management team, U.S. Ambassador to Vanuatu Teddy Taylor, and other foreign government officials were in attendance.

  • April 28, 2011

    Compact end date

    This marks the end of the five-year implementation period.

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