Small Islands and Economic Viability Rose Marie Azzopardi Ph.D Student University of Sussex UK
Main Question Are small islands helpless or resourceful?
The Claims and the Empirical Evidence Disadvantages and Advantages In terms of GDP per capita, six out of 10 richest countries are small states Islandness is not statistically significant Contradictory Inconclusive
… and Salvatore (2001) excludes from his analysis nations with less than 1 million population “ often small island nations with only a few thousand people and little economic significance ” MIRAB, PROFIT, Non-market solutions Vulnerability index
My Paper 26 small independent island states, 30km ² land area, 1.5 million population arguing that successful islands are more focused on invisibles rather than visibles, services rather than manufacturing, to ‘ override ’ transportation costs reassessment of successful islands still needed due to: –erosion of trade preferences –stricter rules in financial activities –widening remit of the WTO –regionalism
The Hard Facts High Income (4 islands) (4/78) 5.1% Upper Middle (11 islands) (11/64) 17.2% Lower Middle (8 islands) (8/58) 13.8% Low Income (3 islands) (3/8) 37.5%
Region Mediterranean islands high income Persian Gulf (high income) Caribbean islands upper middle Pacific (except Palau) all lower end Atlantic and Indian (mixed groups)
GNI per capita of neighbour Pacific all lower Indian Ocean and Persian Gulf all above Caribbean 6 lower, 2 higher Atlantic 2 lower, 1 higher Mediterranean, 1 lower, 1 higher
Dependence on trade and Openness of the economy All islands import more than average of group Only 4 export less than average of group Except for Comoros, all islands have very open economies, above world average and above group averages
Sectoral Activity Primary Sector Majority of islands are above group average (ex: Sao Tome & Principe, Cape Verde, Bahrain, UM5) dependence on agriculture, fisheries, forestry subsistence and exports Sugar, bananas, fish, copra, cocoa
Secondary Sector Almost all islands are below group average (ex. Seychelles, T & T, Bahrain) scale for competition + transportation costs industrialization is not heavy on islands, normally food processing and textiles Bahrain - petroleum products and aluminium T & T - petroleum products, chemicals and steel Seychelles - canned tuna and frozen fish
Tertiary Sector Almost all islands are above group average (ex: Comoros, Solomon Is. Fiji, T & T, Bahrain) High concentration on services, which includes government Almost all have tourism as one of their main industries, followed by offshore banking
GNI per capita Only 9 out of 26 are above the world GNI per capita average of $5500 High income average is $28,550 While the four islands in this group range from $9,260 to $15,110 - all well below the group average
Sectoral Employment Only the four high income islands have single digit percentages of employed people in the primary sector Light industry for most islands and not many people employed in the secondary sector Islands with at least 64% employed in tertiary sector are either in high or upper middle groups and their GNI per capita is above $7000.
Other issues for consideration Tax havens [15(18)/26 OECD 1998 list] Trade concessions (REPAs, WTO) Donor fatigue (ODA decreased by 1/3 in real terms in the 1990s) World Bank, surveillance, effectiveness, package deal Regionalism - ‘ innocent bystander ’ dilemma Informal economy - multiple jobs, small family enterprises
Summing Up Islands still too dependent on primary sector Manufacturing not affordable, unless one has developed a niche market (Bahrain, Seychelles) Focus on services should not be restricted to tourism due to increased competition
Concluding comments Data analysis inconclusive on helpless/resourceful dichotomy Mixture of external management blended with a variety of internal policies Each island must design its own mode of development, based on own geographical, cultural and social realities, yet remaining open to new ideas and engaging more with the global economic environment
Thank you