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This report was prepared for a conference hosted by the Asian Development Bank and the World Trade Organization entitled «Mobilizing Aid for Trade: Focus on Asia and the Pacific.» It seeks to bring a better understanding of contemporary trade issues in the Pacific region.

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This collection of studies on the political economy of Pacific island countries was authored by writers from various disciplinary backgrounds. Their research confirms the results of political economy studies of economic reform in developing countries from elsewhere around the world and shines new light on the kinds of obstacles that have to be overcome for economic reform to be successful in the Pacific. This publication presents many valuable lessons for agencies assisting in the economic development of Pacific island countries.

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Over the last several years, Vanuatu has become one of the fastest growing economies in the Pacific region driven primarily by tourism, construction, and aid inflows. The achievement of strong economic growth has also occurred on the back of improved economic policy, effective fiscal management, and improved environment for private sector development. While recent gains have been impressive, more remains to be done to sustain growth and ensure the benefits are distributed throughout the nation. The Government is now on a sound financial footing and is well placed to address key development issues. The report discusses options for responding to these needs with a view to helping guide public policy formulation in Vanuatu.

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The Pacific Approach of the Asian Development Bank (ADB) places good governance at the heart of the development agenda and identifies public sector management as an important driver of change. This study, prepared as a background for the Pacific Approach, reviews recent literature and analysis on the state’s role in the development of Pacific developing member countries, and suggests priorities for future support by ADB and its development partners of improved state performance and capacity of these Pacific states.

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