THE VULNERABILITY INDEX Lino Briguglio University of Malta Inter-regional Preparatory Meeting for the World Summit for Sustainable Development Singapore, 7-11 January 2002

VULNERABILITY OF SIDS ECONOMIC VULNERABILITY stems from a number of inherent characteristics of SIDS: ·     The small size of SIDS, which limits their ability to reap the benefits of economies of scale and constrains production possibilities. ·     A high degree of economic openness rendering these states particularly susceptible to economic conditions in the rest of the world

ECONOMIC VULNERABILITY (Cont) ·     Dependence on a narrow range of exports, giving rise to the usual risks associated with lack of diversification. ·     Dependence on imports, in particular energy and industrial supplies, exacerbated by limited import substitution possibilities. ·    Insularity, peripherality and remoteness, leading to high transport costs and marginalization.

ENVIRONMENTAL VULNERABILITY Small island states tend also to be environmentally vulnerable, mainly due to: ·        Limited assimilative and carrying capacity, leading to problems associated with waste management, water storage and other factors associated with small territorial size. ·        A relatively large coastal zone, in relation to the land mass, making these states especially prone to exposure to waves, winds, and erosion.

ENVIRONMENTAL VULNERABILITY (Cont) ·        Fragile ecosystems, because of low resistance to outside influences. ·        A proneness to natural disasters, including earthquakes, volcanic eruptions, cyclones, hurricanes, floods, tidal waves and others. ·        A relatively high proportion of land which could be affected by sea level rise. ·        Economic development has relatively large impacts on the environment.

VULNERABILITY & ECONOMIC SUCCESS In spite of their economic and environmental vulnerability, many small states do not register very low GNP per capita. This gives the impression of economic strength, and masks the fact that SIDS are fragile and dependent to a high degree on conditions outside the country’s control. (There are, of course, a number of SIDS which have low GNP per capita and are classified as Least Developed Countries).

THE ORIGINS OF THE INDEX This has led to the development of an economic vulnerability index, the main objective being to highlight the underlying economic and environmental fragility of small states. The computation of a Vulnerability Index was first proposed by the present author in 1985 and was produced for the first time in 1992 for UNCTAD.

METHODS There are three basic methods for computing a vulnerability index: · Using variables (the component of the index) which render a country as vulnerable. Since these variables are measured in different ways, summing these variables requires standardisation of the observations (Briguglio, Chander, Wells, Crowards, CDP) · Mapping on a categorical scale (1-7) and taking an average (SOPAC) · Regression method and using predicted values of the dependent variable (Comm. Secretariat.)

COMPONENTS OF THE INDEX   The vulnerability indices developed so far differ also in terms of complexity. The economic vulnerability indices generally include a relatively small number of variables, often limited to three to five. One reason for this is that many economic variables are correlated with each other and one variable could be used to represent others.

COMPONENTS OF THE ECONOMIC VULNERABLE INDEX The most frequent variables used in the economic vulnerability indices relate to: • Economic openness • Export concentration • Dependence on imports of energy • Peripherality

THE ECONOMIC RESILIENCE COMPONENT Some indices incorporate a resilience component to allow for the ability of countries to absorb, cope or bounce back: Commonwealth Secretariat uses a GDP variable, assuming that the larger the GDP the better is the ability to cope Briguglio uses a GDP per capita index, assuming that the ability to cope needs to be deflated by population size .

ECONOMIC VULNERABILTY INDEX PROPOSED BY THE PRESENT AUTHOR Components: Vulnerability Variables: • Economic openness [(X+M)/GDP] • Export concentration • Dependence on imports of energy • Peripherality Resilience Variable: GDP per capita

ECONOMIC VULNERABILITY INDEX PROPOSED BY THE PRESENT AUTHOR Variables used as component of the index are measured using a standardisation procedure to permit summing of the components: Xi – Min (X) / Max (X) – Min (X) where: • Xi is the observed value of component X • Min (X) is the minimum value of component X; and • Max(X) is the maximum value The result will be between 0 and 1, where 1 will represent the highest incidence and 0 the lowest incidence on a standardised scale. An equal weighting scheme is used for summing the components.

THE VULNERABILITY INDEX OF THE CDP FOR LDCs The Committee for Development Policy (of the UN ECOSOC) uses the following variables for its Economic Vulnerability Index: • Export Concentration • Instability of Agricultural Production • Instability of Exports • Population size • Share of Manufacturing and Modern Services. The variables are standardised as just described and summation is through an equal weighting scheme.

THE VULNERABILITY INDEX OF THE COMMONWEALTH SECRETARIAT The Commonwealth Secretariat index focuses on income volatility and attempts to predict vulnerability using a regression method. The method assumed that vulnerability is represented by income volatility and that the latter is a function of a number of “vulnerability” variables. The estimated coefficients are taken as the weights for summing the components. In this case the variables do not need to be standardised.

THE VULNERABILITY INDEX OF THE COMMONWEALTH SECRETARIAT The method involves estimating an equation of the type: V =  (X1) + b (X2) + c (X3) where: • X1, X2 and X3 represent the individual components of the index, • ,b and c are estimated coefficients using weighted least squares method; and • V is the predicted volatility indicator, assumed to capture vulnerability

THE VULNERABILITY INDEX OF THE COMMONWEALTH SECRETARIAT All Economic Vulnerability Indices arrive at the conclusion that small states (most of which are SIDS) are among the most vulnerable countries. An expert group meeting held at the United Nations Headquarters in December 1997, after reviewing the vulnerability indices produced until then, concluded that SIDS, tend to more vulnerable as a group than other groups of countries.

THE EVI PROPOSED BY SOPAC The Environmental Vulnerability Index (EVI) developed by Kaly et al. utilized a large number of variables (49 in all) since, as argued by the authors, a large number of indicators are required for complex ecological systems. Each indicator was measured along a 7 point scale, where 7 represented the highest incidence and 1 the lowest.  

 COMPONENTS OF THE EVI •  A sub-set of indicators are used to measure the Level of risks (or pressures) which act on the environment forming the risk exposure sub-index (REI) • Another sub-set of indicators are used to measure Intrinsic resilience of the environment to risks (IRI) •  A third sub-set are used to measure Extrinsic vulnerability, forming the environmental degradation sub-index (EDI) which describes the ecological integrity  

COMBINING THE ECONOMIC AND ENVIRONMENTAL VULNERABILITY To date there has not been a serious attempt to create a super-composite index which combines environmental and economic vulnerability. The CDP however claim that the fluctuations in agriculture variable may capture environmental factors in the Vulnerability Index.

 BENEFITS OF THE INDEX   There are at least two benefits associated with the production of a Vulnerability Index:  • The index can draw attention to the issue of economic and environmental vulnerability of SIDS, LDCs and other vulnerable countries • The index presents a single-value measure of vulnerability based on meaningful criteria and this can be considered for the allocation of financial and technical assistance or for assigning special status to vulnerable countries  

WEAKNESSES There are a number of weaknesses in the currently developed Vulnerability Indices. These weaknesses are principally associated with: • the subjectivity in the choice of variables • absence of data for some countries • the method of measurement (due to e.g. inconsistent measurement across countries) • the weighting and averaging procedure

THANK YOU FOR YOUR ATTENTION comments and questions welcome