Small states and the pillars of economic resilience

This chapter reviews the role of the Commonwealth Secretariat in promoting the interests of small states. Thirty-two of the Commonwealth's 53 member countries are small states, mostly with populations of less than 1.5 million. The Secretariat attaches high priority to supporting their integration in the global economy, building their economic resilience and competitiveness. The Secretariat provides advocacy, policy advice and technical assistance to small states, with a focus on the transition to the changing global trade regime, in an attempt to strengthen their capacity to exploit new opportunities arising from globalisation.peer-reviewe

Small states and the pillars of economic resilience

Small developing states tend to be inherently prone to exogenous shocks over which they can exercise very little control, if any. In the main such proneness emanates from these states' structural trade openness and their very high dependence on a narrow range of exports. There are a number of small developing states that, in spite of their economic vulnerability, manage to generate a relatively high GDP per capita when compared with other developing countries. This can be ascribed to economic resilience building, which Briguglio et al. (2006) associate with policy-induced measures that enable a country to recover from or adjust to the negative impacts of adverse exogenous shocks and to benefit from positive shocks. Briguglio et al. argue that economic resilience depends upon appropriate policy interventions in four principal areas, namely macroeconomic stability, microeconomic market efficiency, good governance and social development.peer-reviewe

Essays on Foreign Direct Investment, Free Trade Agreements, and the Digital Economy

Economic globalization’s key components include international trade, foreign direct investment (FDI), and the digital economy. FDI stimulates export growth, complementing international trade. The global economy is being transformed by digitalization, boosting international trade and GDP through speed, convenience, productivity, and transparency and driving shifts in FDI patterns through resource-efficient products and green technologies. This dissertation investigates three prominent issues - the FDI inflows to fragile, least-developed countries (LDC), the proliferation of Free Trade Agreements (FTA,) and the digital economy. Using the Generalised Least Squares Random effects (GLS RE) and the Ordinary least squares (OLS) estimations with a sample size of 156 countries, the research found that market size (GNI), human development (HDI), the presence of liquified natural gas (LNG), the presence of precious stones and mineral resources, least developed country (LDC) classification, and trade openness positively determine FDI. At the same time, fragility, measured by the fragile states index and political instability, can reduce FDI. Also, the research into FTAs used the Kruskal-Wallis H test to study the 356 FTAs registered by the WTO at the end of 2022. The research found that FTAs differ based on the number of countries, economic regions, and goods and/or services coverage. The research on the digital economy used a case study methodology to analyze its features and how it has contributed to cross-border trade and investment. The research findings show that internet connections, the ubiquitous mobile phone, and the actions of digital MNEs have created an ecosystem that has changed how we work and play and boosted cross-border trade in goods and services. For example, digital platforms such as Airbnb and social media platforms, including YouTube, have enabled trade in services across borders. The research findings can contribute to national and multilateral discussions. Countries can implement policies and programs that promote FDI and advance the digital economy. At the same time, at the multilateral level, discussions can acknowledge the disparities and policy challenges of the digital economy and the erosion of free trade caused by FTAs and pursue multilateral solutions that would benefit the global economy

Profiling vulnerability and resilience : a manual for small states

This report presents a profile of Vanuatu's economic vulnerability and economic resilience. Economic vulnerability is defined as the exposure of an economy to harmful external economic shocks that are outside the economy's control, typically resulting from high degrees of economic openness and dependence on a narrow range of exports. Economic resilience is the policy-induced ability of an economy to withstand and rebound from the negative effects of such shocks. In this report, such resilience is associated with macroeconomic stability, market efficiency, good political governance, social development and good environmental management, as explained in Briguglio et al. (2006, 2009). Economic vulnerability and insufficient resilience typically lead to a slower and more volatile pattern of economic development (Cordina 2004a, 2004b).peer-reviewe

Profiling vulnerability and resilience : a manual for small states

The global financial crisis of 2008 and 2009 and resulting global recession have impacted most economies, including those of small states, which are characterised by a high degree of economic openness. All three small island states that were profiled in the previous chapters were adversely affected but not with the same intensity, with Vanuatu still registering positive growth in 2009, whereas St Lucia and Seychelles are estimated to have experienced negative growth rates (IMF, 201 Oe). Recent evidence would seem to suggest that the major effects on these small states were not mostly felt on the financial sector, due to the fact that the banking industry in these states did not indulge in excessively risky business, but on aggregate demand, especially on exports of goods and services. This chapter will briefly describe recent changes in the economies of these three small island states, with information derived mostly from IMF surveys.peer-reviewe

Profiling vulnerability and resilience : a manual for small states

This publication forms part of a project between the Commonwealth Secretariat and the Islands and Small States Institute of the University of Malta, involving a series of workshops and accompanying publications on the economic vulnerability and resilience of small states. One of the outcomes of the project was the development of an economic resilience index. The project has also led to the development of conceptual and practical approaches for profiling countries in terms of economic vulnerability and resilience. [excerpt]peer-reviewe

Profiling vulnerability and resilience : a manual for small states

Studies on economic vulnerability and resilience indices undertaken so far focus on a cross-sectional approach, comparing one country with another in terms of a number of variables, with the aim of benchmarking countries within a global context. These indices are useful mainly for three purposes. One is to disseminate information on the issues of vulnerability and resilience because an index is a very good instrument for drawing attention to the issue being investigated. A second purpose is to help to develop a common language for discussion, because the derivation of indices requires quantification and hence, precise definitions of fundamental notions. The third is to promote the idea of integrated action because vulnerability and resilience indices are composite and therefore combine a number of factors thought to determine these conditions. It is, however, also true that for the purposes of policy formulation and implementation, benchmarking within an international context is often merely a starting point, which needs to be followed by more in-depth investigation of issues within the specific context of the country and its circumstances. Briguglio et al. (2008) argued that while the notions of economic vulnerability and resilience have been crucial towards promoting a better understanding of development issues of small states especially in relation to the success of some of them as compared to larger countries, the practical applicability of these notions within the context of policy-setting for an individual country must go beyond the construction of indices derived from internationally comparable data. An important limitation of cross-sectional approaches emanates from the fact that, in order to compare-one country with another, a variable within an index may be considered redundant, and thereby omitted, if it is highly correlated with another that is already included in the index. While this is a valid action within a benchmarking study, it may not be suitable for a study focusing on an individual country, where all aspects of vulnerability and resilience need to be studied, irrespective of whether they are correlated or otherwise. This chapter, based on Briguglio et al. (2008), describes a conceptual approach aimed at building a template of variables to be considered in the derivation of a vulnerability/ resilience profile for an individual country.peer-reviewe

Profiling vulnerability and resilience : a manual for small states

As explained in the previous chapter, studies that produce indices of economic vulnerability and resilience are cross-sectional approaches, aimed at benchmarking countries within a global context. For the purposes of policy formulation and implementation, benchmarking within an international context is often merely a starting point which needs to be followed by more in-depth investigation of issues within the specific context of the country and its circumstances. A project towards this end was conducted by the Commonwealth Secretariat in collaboration with the University of Malta. This project led to the to the development of a conceptual approach for profiling an individual country in terms of vulnerability and resilience, as described in the previous chapter. Importantly, the project also led to the profiling of three small states namely St Lucia, Seychelles and Vanuatu, in terms of economic vulnerability and resilience. This chapter puts forward a practical guide as to how the conceptual approach described in the previous chapter can be applied.peer-reviewe

Profiling vulnerability and resilience : a manual for small states

This report presents a profile of the economic vulnerability and economic resilience of St Lucia. Economic vulnerability is defined as the exposure of an economy to harmful external economic shocks that are outside the economy's control, typically resulting from high degrees of economic openness and dependence on a narrow range of exports. Economic resilience is refers to policy-induced ability of an economy to withstand and rebound from the negative effects of such shocks. In this report, such resilience is associated macroeconomic stability, market efficiency, good political governance, social development and good environmental management, as explained in Briguglio et al. 2006, 2009). Economic vulnerability and insufficient resilience typically lead to a slower and more volatile pattern of economic development (Cordina 2004a, 2004b).peer-reviewe

Profiling vulnerability and resilience : a manual for small states

In this paper, the term economic resilience is used in two senses respectively relating to the ability of an economy to (i) recover quickly from harmful external economic shocks; and (ii) withstand the effect of such shocks.peer-reviewe