Business as usual?

Written for the Vanuatu Daily Post

Moana Carcasses wants changes to the VIPA Act. That might be a good idea.

Back in 2013, when Moana Carcasses was prime minister and acting minister of Trade, Cooperatives and Ni Vanuatu Business, he put a stop to the issuing of so-called D2 business licenses. These are the licenses needed to run a retail/wholesale shop.

Mr Carcasses was reacting to a widespread—and largely accurate—belief that some investors were flouting the intent of the VIPA Act, which reserves certain sectors and occupations to Ni Vanuatu. Now, two years later, he wants to review his decision.

He’s right to do that as well.

It’s clear today that a blanket ban on issuing D2 licenses has done little to remedy the situation. On the contrary, it has stifled the diversity of shops and retail goods in Port Vila.

During a public meeting earlier this week, about 40 of the usual suspects turned up to comment. The Chamber of Commerce (or VCCI) sent a delegation, and local merchants and manufacturers showed up to check on things.

The feedback, if well-intentioned, was predictable. A VCCI representative trotted out the tired assertion that the Vanuatu Investment Promotion Authority can either promote or regulate business, but not both. This is just wrong. Responsible business promotion requires regulation.

Other representatives highlighted the business awareness and training activities that the VCCI is undertaking. These activities are nice, but they have yet to make a dent in the desultory economic growth rate, and there is little likelihood that they will.

Others pointed out that Ni Vanuatu operate at a deficit, lacking access to credit and financial services. The result, not to put too fine a point on it, is that outsiders move in to fill the gaps in business sectors left empty by law and economic circumstance.

And because they’re skirting the rules, some business owners don’t participate as they should in the formal economy.

But let’s not single out small shop owners. Disrespect for the rules laid out by VIPA, Customs and other relevant authorities is widespread. So much so that one VCCI member characterised the process of setting up a business as a ‘minefield’.

This may be a case of familiarity breeding contempt, but it’s a bit rich to hear from the same gang that has in the past been happy to dodge and weave around its civic responsibility when it comes to respecting workers’ rights, taxation and reporting.

Yes, we need simpler laws and regulations. We also need to show a little more respect for the rules that we have.

Efforts to improve enforcement have garnered real results. While business owners griped and moaned about it, a more robust VAT collection regime resulted in double-digit growth in taxation revenues in 2013. The government is stronger as a result.

So much for the stick. The carrot could be a little sweeter, too. It’s clear that VCCI, a publicly-funded entity, is in need of inspiration. It’s clear, too, that VIPA’s regulatory regime could be simplified.

So let’s kill two birds with one stone.

Stop segregating business categories based on turnover. A business is a business is a business. Charge a single, flat fee for the license itself, then tax a percentage of overall turnover. This shares the tax burden fairly between large and small investors, and eliminates the rather parochial distinction between Ni Vanuatu business people and others.

And as part of the reform effort, make the Chamber of Commerce a member-funded institution. Instead of being funded from license fee revenues, VCCI should collect membership dues directly from local businesses. This way, the VCCI will prosper—or not—based on its value to businesses.

Freeing the organisation from reliance on government will also give it more leeway to lobby government without fear of biting the hand that feeds it.

None of this improves Ni Vanuatu access to credit or financial services. And it’s telling that not a single representative from our retail banks saw fit to attend the Minister’s consultation. But at very least, we begin to level the playing field, and allow a simpler set of rules to be enforced without fear or favour.

It’s not sufficient in itself, but it’s a good start. Consultations will continue till the end of August.