Aid money from New Zealand will help Vanuatu move to an electronic passport system and build a new passport office.
Passports issued by Vanuatu are currently handwritten and the New Zealand government says the new system will make for better regional security by reducing the potential for crime and fraud.
Prime Minister Edward Natapei says it is difficult for him to travel on a diplomatic passport, let alone the average citizen.
He says Customs officials in other countries often have not even heard of Vanuatu and he's often held up while they confirm who he is and that he's travelling on a valid passport.
The funding will come from the $19 million of annual aid funding that New Zealand provides to Vanuatu.
