Reducing Poverty Through Growth

Fact Sheet

March 2, 2006 www.mcc.gov

Vanuatu and Millennium Challenge Corporation:

Building a Dynamic Partnership for

Poverty Reduction through Economic Growth

Vanuatu is a small island nation in the South Pacific comprised of 83 separate islands, where approximately half of 

the population lives in poverty. Costly and unreliable transportation is a major impediment to economic growth 

and poverty reduction in Vanuatu. As a small, open, island economy, agriculture and tourism are central to Vanuatu’s growth. These two sectors together employ more than 70% of Vanuatu’s working population and represent 

approximately 34% of Vanuatu’s GDP. 

The five-year Compact program addresses the country’s poor transportation infrastructure. Consisting of up to 

eleven infrastructure projects—including roads, wharfs, an airstrip and warehouses—the program aims to 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 MCC program is expected to have a transformative impact on Vanuatu’s economic development by increasing 

average income per capita by 15% within 5 years and directly impacting the lives of more than 65,000 poor, rural 

inhabitants—almost a third of the entire population. 

Vanuatu’s MCA program consists of two principal components: 

•	 Civil works for the reconstruction of priority transport infrastructure on eight islands, covering roads, 

wharfs, an airstrip, and warehouses; and 

•	 Institutional strengthening efforts and policy reform initiatives in Vanuatu’s Public Works Department, 

including: provision of plant and equipment for maintenance; introduction of service performance 

contracts; establishment of local community maintenance schemes; and introduction of user fees. These 

efforts aim to ensure the sustainable operation and maintenance of Vanuatu’s entire transport infrastructure network, not only those assets built or rehabilitated with MCC funds.

In developing its proposal for MCA assistance, Vanuatu utilized its Comprehensive Reform Program Summit, 

National Business Forum, and provincial Rural Economic Development Initiative (REDI) workshops to engage 

in a comprehensive consultative process with a broad segment of ni-Vanuatu society, including: Vanuatu’s 

council of chiefs, leaders of women’s groups, the private sector, NGOs, church leaders, and local government 
Millennium Challenge Corporation

Fact Sheet: Vanuatu March 2, 2006 2

officials from Vanuatu’s provinces. The proposed projects were derived from each province’s participatory Rural 

Economic Development Plan and received strong support from Vanuatu’s donor community. To maintain public 

awareness and participation, the Government of Vanuatu has held MCA public outreach meetings in various 

provinces and engaged local media regarding proposal due diligence, project selection, and Compact development.

The Compact includes $3.63 million for Program administration and audits. A comprehensive fiscal oversight 

and governance structure has been developed as part of the Compact to ensure maximum accountability 

for MCC funds, including the establishment of an accountable entity comprised of both government and 

non-governmental stakeholders. MCC has also retained approval rights over key agreements and implementation actions, e.g., selection of key service providers, certain payments, certain procurements, key personnel 

decisions for the accountable entity, detailed financial plans as well as the monitoring and evaluation plan 

In addition, the Compact provides $1.37 million for Monitoring and Evaluation (M&E) activities, which includes 

support for data collection and reporting on economic and poverty impact indicators, and key implementation 

benchmarks for the civil works and maintenance project components.

###

Millennium Challenge Corporation (MCC), a United States government corporation designed to work with some of the 

poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, 

economic freedom, and investments in people that promote economic growth and elimination of extreme poverty
Millennium Challenge Corporation

Fact Sheet: Vanuatu March 2, 2006 3