Small Island Developing States, Vulnerability

McGillivray, Mark

Santos-Paulino, Amelia U.

Wim Naudé

English

Research Papers in Economics

 
  
 
Highlights: 
The Challenge of Small Island 
Developing States 
Wim Naudé, Mark McGillivray and 
Amelia U. Santos-Paulino. Full article. 
  
  
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EVENTS 
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JULY 2010  
 
FEATURE ARTICLES AND HIGHLIGHTS 
 
The Challenge of Small Island Developing States 
Wim Naudé, Mark McGillivray and Amelia U. Santos-Paulino. Full article. 
RECENT EVENTS 
Global Crises and Entrepreneurial Incentives with Wim Naudé. New York, 
USA 
24 June 2010 
Nordic Conference in Development Economics (NCDE), Helsinki, Finland 
18-19 June 2010 
The (Evolving) Role of Agriculture in Poverty Reduction: An Empirical 
Perspective, with Luc Christiaensen. New York, USA 
2 June 2010 
ANNOUNCEMENTS 
Visiting scholars and PhD Research internship programme. 
Application closing date 30 September 2010. 
 
For more information on how to apply, see Opportunities. 
PUBLICATIONS 
Books and Journals 
Special Section: Female Entrepreneurship across Countries and in 
Development 
The European Journal of Development Research, Volume 22(3) 
Guest Editors Maria Minniti and Wim Naudé 
UNU-WIDER Special Issue on Fragility and Development in Small Island 
Developing States 
The Journal of Development Studies, Volume 46(5) 
Edited by Amelia U. Santos-Paulino, Mark McGillivray and Wim Naudé 
Urbanization and Development: Multidisciplinary Perspectives 
(forthcoming) 
Edited by Jo Beall, Basudeb Guha-Khasnobis and Ravi Kanbur 
The Rise of China and India: Impacts, Prospects and Implications 
(forthcoming) 
Edited by Amelia U. Santos-Paulino and Guanghua Wan  
Information on all of WIDER's publications is available on our website: 
http://www.wider.unu.edu/publications/ 
 
WIDER Working Papers 
The Impact of Multiple Imputation of Coarsened Data on Estimates on the 
Working Poor in South Africa 
Claire Vermaak WP2010/86 
Elites and Institutional Persistence 
James A. Robinson WP2010/85 
Page 1 of 2 WIDER Angle - July 2010
17/08/2010 http://www.wider.unu.edu/widerangle_newsletter/2010/en_GB/07-2010-wider-angle/Why Are the Elite in China Motivated to Promote Growth? 
Xiaowei Zang WP2010/84 
The Long-Run Weight of Communism or the Weight of Long-Run History? 
Gérard Roland WP2010/83 
Elite Capture or Capture Elites? Lessons from the 'Counter-elite' and 'Co-
opt-elite' Approaches in Bangladesh and Ghana 
Sam Wong WP2010/82 
Two for the Price of One? The Contribution to Development of the New 
Female Elites 
Alison Wolf WP2010/81 
ICT Sector, Globalization and Urban Economic Growth: Evidence from 
Bangalore (India) 
M. R. Narayana WP2010/80 
Energy Consumption and Carbon Emission-Based Productivity Change and 
Industrialization in Post-Reform China 
Shiyi Chen and Amelia U. Santos-Paulino WP2010/78 
When Unstable, Growth Is Less Pro-Poor 
Patrick Guillaumont and Catherine Korachais WP2010/77 
Subjective Poverty and Reference-Dependence: Income over Time, 
Aspirations and Reference Groups 
Carolina Castilla WP2010/76 
Misuse of Institutions: Lessons from Transition 
Leonid Polishchuk WP2010/75 
Poverty and Time 
Walter Bossert, Satya R. Chakravarty and Conchita d'Ambrosio WP2010/74 
Empirical Issues in Lifetime Poverty Measurement 
Michael Hoy, Brennan Scott Thompson and Buhong Zheng WP2010/73 
Measuring the Effect of Spell Recurrence on Poverty Dynamics 
José Maria Arranz and Olga Cantó WP2010/72 
On Some Problems of Variable Population Poverty Comparisons 
Nicole Hassoun and S. Subramanian WP2010/71 
Globalization and Exclusionary Urban Growth in Asian Countries 
Amitabh Kundu and Debolina Kundu WP2010/70 
How Production Firms Adapt to War: The Case of Liberia 
Topher L. McDougal WP2010/69 
Entrepreneurship and Human Development: A Capability Approach  
Thomas Gries and Wim Naudé WP2010/68 
Globalizing Households and Multi-ethnic Community Building in Japan 
Chihiro Ishii WP2010/67 
Health and the Urban Transition: Effects of Household Perceptions, 
Illness, and Environmental Pollution on Clean Water Investment 
James H. Spencer WP2010/66 
  
Information on all of WIDER's publications is available on our website: 
http://www.wider.unu.edu/publications/  
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The Challenge of Small Island Developing States 
Wim Naudé, Mark McGillivray and Amelia U. Santos-Paulino 
A vital part of WIDER's research agenda has in recent years focused on the challenges faced by Small Island 
Developing States (SIDS) – a group of countries and territories often neglected in the mainstream development 
discourse. Understanding the challenges faced by SIDS is important, particularly given the impact of global crises 
and natural disasters on their development prospects. In many ways, SIDS are bearing the brunt of crises in 
climate, food and finance and their responses and efforts at building resilience may provide valuable lessons for 
other countries and regions. In this article, we provide a brief overview based on three journal special issues and 
sections emanating from the WIDER research project on Fragility and Development, dealing with the core 
concerns of SIDS. 
  
A Diverse Group 
SIDS is a diverse group in a number  respects – in fact the United Nations currently classifies 52 countries and 
territories as Small Island Developing States (SIDS). More than 50 million people live in these countries. Forty-
three of them are located in the Caribbean and the Pacific regions. The group includes countries that are 
relatively rich by developing country standards, such as Singapore and Bahamas, but also some of the poorest 
countries in the world, including Comoros, Haiti, Kiribati and Timor-Leste. 
As Figure 1 shows (comparing GDP per capita in the Caribbean and Pacific) that, GDP per capita ranges from 
$US 28,000 in Singapore to only $US 369 in the Comoros. 
 
The flight arrivals and departures notice board at Bonriki 
International Airport, Kiribati's only international airport. 
Photo: Mark McGillivray 
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Sharing a Common Vulnerability to External Shocks 
Despite this, all SIDS are vulnerable to economic shocks and natural hazards to a degree that few other countries 
or regions are. This is reflected in the volatility of SIDS GDP growth. SIDS located in the Pacific region record the 
lowest average and by far the most volatile GDP growth. Pacific SIDS growth rates range from 2.0 to 9.1 percent 
and the volatility, as measured by the coefficient of variation is more than twice that of all developing countries 
and the SIDS group as a whole. Volatility in GDP growth rates is also higher in SIDS located in Africa and the 
Caribbean, respectively, than in all developed countries. 
SIDS rely heavily on trade to drive growth, hence the volatility of their growth. Work carried out for the WIDER 
project, for instance, shows that in the Caribbean the top five export commodities for between 70 per cent and 96 
per cent of the regions' exports. This creates economic vulnerability to changes in export demand and commodity 
prices. Trade flows, expressed as the sum of commodity exports and imports relative to GDP, are far higher in 
SIDS than in all other Developing countries (DCs) and the Least Developed Country (LDCs) group. Commodity 
exports and imports as a percentage of GDP in any one year were no less than 95 and as high as 141 per cent, 
and averaged 110 per cent over the period 1980 to 2007. The equivalent numbers for all developing countries 
were 64, 94 and 78 per cent, respectively. 
More pertinent is volatility in trade given its implications for vulnerability to external shocks. Indeed, SIDS trade is 
more volatile than for other developing countries. The coefficient of variation for SIDS trade relative to GDP for 
the period 1980 to 2007 is 10.23, compared to 7.56 and 8.80 for DCs and LDCs respectively. 
In addition to export dependency, external vulnerability is accentuated by the fact that for most households in 
SIDS, remittances from abroad is a very important source of income. While this create a vulnerability towards 
global downturns , when remittance decline (as during the recent global financial crisis) it also acts as a buffer in 
the case of local hazards – it is often found that remittances to SIDS increase in the wake of a natural disaster. 
(Source: adapted from Naudé, McGillivray and Santos-Paulino, eds. Vulnerability in Developing 
Countries, Chapter 10). 
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Natural disasters remain a looming threat to daily life in most SIDS, and many expect the frequency and intensity 
of natural hazards to increase as a result of climate change. The February 2010 Angle Newsletter contained two 
feature articles focusing on natural disasters, particular earthquakes, in the wake of Haiti's terrible earthquake of 
12 January 2010.  As Evans Jadotte put it in his Angle article, the earthquake 'came as a terrible unexpected 
shock to one of the poorest countries in the world, that is still staggering from three hurricanes and a tropical 
storm that wrecked almost 70 per cent of its agriculture in 2008'. To this one can add that the disaster occurred 
during a global slowdown, when needed remittances and aid were on a declining trajectory. Vulnerabilities to 
economic and natural shocks are very much intertwined in many SIDS.
The Need to Strengthen Resilience 
Natural hazards and external economic shocks need not result in disasters – but this requires building and 
strengthening the resilience of households and states in SIDS. Education, health and infrastructure contribute 
importantly to household resilience. However in providing these many SIDS fall short, and often require 
substantial foreign aid. Overall, SIDS receive the highest levels of foreign aid of all developing countries relative 
to their GDP – over the period 1980 to 2006 amounting on average to 16 per cent of GDPs, compared to only 
one per cent on average for all other developing countries. 
There is however considerable variation within the SIDS group in terms of aid, remittance and FDI flows. SIDS in 
the Pacific receive very large amounts of aid and remittances and low amounts of FDI relative to GDP. Aid and 
remittances to these countries are indeed far higher, at the equivalent of 23 and 11 per cent of GDP, respectively. 
African SIDS receive higher levels of FDI relative to GDP, at 19 per cent, than the other groups of SIDS. The 
Caribbean SIDS depend less on aid, remittances and FDI, with these flows being no higher than the equivalent of 
six per cent of GDP. 
Resilience is often constrained by the fact that the quality of governance varies tremendously among SIDS and 
many are prone to state failure – SIDS are over-represented in the fragile state category countries. This is made 
worse by evidence that fragile and failing states are less able to absorb aid effectively. 
A woman walks away from a burning market in Port-au-Prince, Haiti, 
after the January 2010 earthquake. Source: UN Photo: Marco 
Dormino 
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Achieving and sustaining development in SIDS is a complex and demanding tasks. Among its prerequisites is an 
understanding of the roles played by aid, trade, remittances and governance. What is the impact of aid on growth 
and related outcomes? How should aid be allocated among SIDS? What are the impacts of trade shocks on 
current account balances? What drives remittances to SIDS and what are their macroeconomic impacts? What is 
the relevance of governance to growth in SIDS and what are the costs of state failure in them? These issues are 
addressed in the three journal special issues emanating from the WIDER research project on Fragility and 
Development. 
The papers in the WIDER special issues referred to (see further reading below) all strongly suggest that the role 
of the international community is crucial in the future development of SIDS. Many crucial but unresolved issues 
remain. As mentioned here, the role of aid in overcoming fragility and vulnerability is not straightforward, and the 
integration of SIDS into the global economy not without adverse affects. Many global uncertainties, amongst 
which global climate change, rising oil and food prices, and changing patterns of south-south trade are of rising 
concern to these states. Future research will have to deal with these aspects, however, the contributions in these 
issues emphasizes the importance of strengthening governance, establishing political stability, implementing 
better macro-economic policies and building human capital as immediate priorities. These will also be needed to 
confront future uncertainties. 
Finally, despite facing a common set of complex development challenges as was emphasized here, SIDS many 
differences. They represent countries with different historical-institutional development paths, with differing levels 
of development, state formation and effectiveness, and different external relations. While there are many 
common solutions, eventually all solutions will have to implemented and adopted to the unique circumstances 
facing every individual country in this region. Much further research is required to better understand these 
individual country requirements to address the challenges of SIDS. 
About the authors 
Mark McGillivray is Research Professor in International Development at the Alfred Deakin Research Institute, 
Deakin University, Australia, and a previous Deputy Director of UNU-WIDER. 
Wim Naudé is Senior Research Fellow and Project Director at UNU-WIDER, Helsinki, Finland. 
Amelia U. Santos-Paulino is Research Fellow at UNU-WIDER, Helsinki, Finland. 
 
Further reading  
Special Issue: Fragility and Development in Small Island Developing States 
Edited by Amelia U. Santos-Paulino, Mark McGillivray and Wim Naudé 
Journal of Development Studies, May 2010, volume 46, number 5. 
  
  
  
  
  
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Policy Arena: Small Island Developing States: Development Challenges 
Edited by Mark McGillivray, Wim Naudé and Amelia Santos-Paulino 
Journal of International Development, May 2008, volume 20 number 4.  
  
  
  
  
  
  
Focus: Achieving Growth in the Pacific 
Eedited by Mark McGillivray, Wim Naudé and Amelia Santos-Paulino 
Pacific Economic Bulletin, July 2008, volume 23 number 2. 
 
 
  
  
  
  
  
Vulnerability in Developing Countries 
Edited by Wim Naudé, Amelia U. Santos-Paulino and Mark McGillivray 
United Nations University Press, August 2009.  
  
  
  
  
  
WIDER Angle newsletter 
July 2010 
ISSN 1238-9544 
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The Challenge of Small Island Developing States

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The Challenge of Small Island Developing States

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