Vanuatu Commodities Marketing Board utilisation of the 1.3 billion vatu STABEX Funds Subsidy - August 6, 1996 - Emalus Campus
The Vanuatu Commodities Marketing Board (VCMB) is a statutory body with a responsibility to deal with the purchase, sale and export of prescribed commodities. It has a mandate to develop commodity industries in Vanuatu and stabilize prices. According to section 6(2) of the Act the VCMB is required to conduct its affairs without resort to Government grants or subsidies.
Pursuant to an agreement between the Government of Vanuatu and the European Union (EU), the EU provided Stabex funds in the total sum of 2,067,000,000 vatu to the VCMB between 1988 and 1994. During the same period, losses of the VCMB amounted to 2,210,000 vatu. The operation of the VCMB over the period in question not only spent the Stabex funds but also required ongoing funding by the Government of Vanuatu.
The Ombudsman inquired into the Stabex funds, specifically in relation to audits of the VCMB, utilization of the Stabex funds, investments made with the funds and the management of the VCMB.
The report concludes that although some operational improvements could be made in the VCMB, the deficit is not due to the impropriety or lack of integrity among the VCMB employees. However, VCMB decisions were made on a political basis either by the Board which was comprised of political appointees largely without technical expertise or directly by the Minister, Barak Sope once the members of the board’s appointments expired. Many of the decisions of the Board were commercially unsound.
The Government of Vanuatu diverted some of the VCMB funds in the sum of 320,000,000 vatu to its own use by the sale of long term Government bonds to the VCMB. The VCMB was then forced to borrow money from the Government at a higher rate of interest than the bonds provided.
The VCMB loaned money to Melanesian Shipping Line (MSL) in the sum of 56,544,000 vatu. This was commercially unsound and exceeded the security provided by MSL for the loan. Conflicts of interest existed in relation to MSL in that the Managing Director of VCMB was also managing director of MSL. The Minister responsible for VCMB negotiated the purchase of the MV Prince, the main asset of MSL.
The VCMB engaged in improvident housing loans for staff. These loans were at an interest rate of 1%. When these loans went significantly into arrears they had to be covered by VCMB at a higher interest rate.
The Stabex funds were pooled with other monies thereby creating an impression that VCMB was “cash rich’.
· That the Board of VCMB be made independent. The Vanuatu Commodities Marketing Board Act should be amended to provide appointments to the board by politically independent organizations.
· That short term funds advanced to VCMB by the Government be converted into a grant.
· That Government bonds in the sum of 320,000,000 vatu be liquidated.
· That a more satisfactory overdraft arrangement be set up for VCMB.
· That the MV Prince II be sold and an inquiry conducted into it purchase and operation.
· That housing loans of VCMB be transferred to commercial bank.
(see December 12, 1998 report on the sale of MV Prince)
Written by Edward R. Hill
UNDP Governance and Accountability Project
© Ombudsman of Vanuatu
Published here by University of the South Pacific, School of Law Web Site - www.vanuatu.usp.ac.fj