1 The challenges of Small Island Developing States and the Blue Economy
Introduction
The challenges faced by countries around climate change, environmental degradation, rising population and inequality and global economic uncertainty are common. Nowhere do these challenges come into sharper focus though than in SIDS. Alongside the challenges mentioned, they deal with small, often dispersed populations, making public service delivery particularly difficult. They are often susceptible to devastating weather events and can struggle to recover from these due to narrow economies that rely heavily on the oceans for much of their GDP. That ocean-based or Blue Economy is at the heart of much of the discussion around building the strength and sustainability of these island economies, but that in itself faces some significant challenges.
This chapter will examine the specific challenges and vulnerabilities of SIDS, the challenges and problems with overemphasising the Blue Economy and the ways in which the digital-creative industries can aid in facing those challenges.
SIDS as a concept
SIDS were first recognised as a distinct group at the United Nations Conference on Environment and Development in June 1992, a group of island countries that displayed certain characteristics such as small size, limited resources and geographic dispersion. The Agenda 21 document at this conference recognised that these small island states were a special case for both environment and development.
The United Nations Department of Economic and Social Affairs (UN-DESA) currently recognises 57 SIDS (37 UN-Members and 20 Non-UN), divided into three main geographic areas:
- Caribbean
- Pacific
- Atlantic, Indian Ocean, Mediterranean and South China Sea (AIMS).
Specifically, the World Bank defines small states as countries that (a) have a population of 1.5 million or less or (b) are members of the World Bank Group Small States Forum (World Bank, 2016).
They are, however, a diverse group with varying population sizes, cultural characteristics and development progress. Some island states, such as the Maldives, have officially become an upper-middle-income country and is classed by the World Bank as a development success (World Bank, 2020b) with the second-highest Human Development Index (HDI) rank in South Asia and an income per capita of $11,890.
In the same Indian Ocean region however, the Comoros has a per capita income of $1362, with 23.5% of the population living below the poverty line (World Bank, 2018). This diversity however does not mean that there are also some notable common characteristics, particularly as is generally stated, vulnerabilities, that SIDS share.
Key characteristics of SIDS
The Organisation for Economic Cooperation and Development (2018c) does state that the differences among SIDS âpoint to the need for tailored development approaches across the groupâ, yet the common challenges they face mean there is âscope for mutual learningâ.
SIDS are often discussed in their regional subgroups â for example, the Pacific, the Caribbean and AIMS SIDS. However, it has also been suggested that some smaller SIDS subgroups could be created along issues-based categorisations (Alonso Rodriguez et al., 2014).
The most often citied defining characteristics and vulnerabilities of SIDS are their small population sizes, their remoteness from economic markets and principal trade routes, and their often dispersed populations. These dispersed populations mean that domestic markets are small, limiting the economies of scale that larger countries with more condensed populations benefit from (Bartelme et al., 2018). This dispersion also leads to high per-capita costs to deliver essential public services such as health, education and security, with a subsequent significant impact on public finances.
These ânegative effectsâ of small, dispersed populations and the remoteness from markets lead to âhigh production and trading costs, limiting investment, competitiveness and the scope for integrating global value chainsâ (Organisation for Economic Cooperation and Development, 2018b).
This coupling of limited domestic market size and higher export costs means that SIDS economies generally focus on a limited number of sectors, most notably tourism and fisheries, thereby fostering their narrow economic bases. Because of this, public sector jobs often account for a large percentage of the total employment on island states, with the Maldives, for example, having around 40% of its total employment in the public sector (World Bank, 2020c).
The publicâprivate wage differentials along with the other benefits associated with public employment disincentivise young people from seeking private sector jobs and also hold down private entrepreneurship. This has caused relatively elevated levels of youth unemployment, at 15.3%, and low rates of women participating in the workforce (Organisation for Economic Cooperation and Development, 2018b).
This can lead to a shortage of skilled workers and, despite the high unemployment rate, a reliance then on expatriate labour. This stems from limited access to good-quality secondary, tertiary and vocational education, particularly away from capital cities and for those nations with archipelagic structures, coupled to a lack of high-skill and high-value jobs opportunities and the subsequent âbrain drainâ of talent to larger population centres in other countries (de la Croix et al., 2014).
Vulnerability
Vulnerability is an all-consuming narrative for SIDS, an often top-line statement about these regions and unfortunately an all too regular justification for the quasi-colonial attitudes of many developed countries and international organisations.
Vulnerability is a pervasive and continuing narrative for SIDS, one that whilst undoubtedly true also can act as a hindrance to progressive and innovative thinking on regional development.
The concept of vulnerability combines the probability and impact of physical and economic hazardous events (vulnerability), with a particular countryâs ability to manage or adapt to that event (resilience), according to the Environmental Vulnerability Index (EVI) (Organisation for Economic Cooperation and Development, 2018c). The EVI is a measure of the vulnerability of developing countries to economic and environmental shocks, and the determinants of exposure to shocks (e.g. population size and remoteness) (Organisation for Economic Cooperation and Development, 2018c).
As an example, tropical storms and cyclones particularly affect SIDS not only due to their dispersed/remote geographies but also because their small economies and limited state capacity complicate policy responses to these events. This then has a negative impact not just on food security and infrastructure but also on employment and local incomes as these events can have very significant impacts on tourism, a key economic component of the majority of SIDS (Yamamoto & Esteban, 2014).
Climate vulnerabilities
SIDS are particularly vulnerable to the climate crisis and will continue to be among the earliest and most impacted countries (United Nations Office of the High Representative for the Least Developed Countries, Landlocked Countries and Small Island Developing States, 2015). This was officially identified in the Barbados Programme of Action for the Sustainable Development of SIDS in 1994 (United Nations Office of the High Representative for the Least Developed Countries, Landlocked Countries and Small Island Developing States, 2015).
Their climate is influenced by large ocean-atmosphere interactions such as trade winds, El Niño, monsoons and tropical cyclones. With populations, agricultural lands and infrastructures tending to be concentrated in the coastal zone, any rise in sea level will have significant and profound effects on settlements, living conditions and island economies.
(United Nations Office of the High Representative for the Least Developed Countries, Landlocked Countries and Small Island Developing States, 2015)
Changes in sea levels and their impact on coastal regions and livelihoods, ocean acidification and changing chemistry, changing weather patterns and ocean currents and temperatures, all have significant impacts on the whole of the Blue Economy.
The impact on aquaculture of changing ocean chemistry and temperature, affecting both the distribution and stock levels of fisheries and their supporting ecosystems, could be considerable. We see this very clearly in the coral bleaching that has, and continues to, destroyed large areas of coral reefs across the globe.
This reef destruction significantly impacts the level of tourism to SIDS regions, as we have seen from previous episodes of bleaching, such as in 2016, which was the longest and most significant event ever recorded (McDermott, 2016).
Many SIDS are characterised by low resilience to climate change, and the impact on their Blue Economy development will be considerable if collaborative action is not forthcoming. This is not only in terms of regional and multi-regional cooperation â which is well understood and accepted â but also in terms of cross-sector and multi-sector approaches to Blue Economy innovations that respond to those climate challenges and changes. This second point often goes unrecognised.
Responses to these changes are generally formed around mitigating the extent of climate changeâadapting activities to take into account the changes already happening (Colgan, 2018).
Ironically, the contribution to global warming of SIDS is low in terms of total carbon emissions, although they are the most likely to suffer the adverse effects of climate change (Ponte et al., 2017).
Economic vulnerability
Most SIDS have narrowly based economies that depend on just a few products and sectors due to their small domestic markets, distance from markets, high production costs, limited competitiveness and difficulties in integrating in global value chains (Organisation for Economic Cooperation and Development, 2018b). This is especially evident in some of the LDCs that are SIDS (e.g. Guinea-Bissau, Timor-Leste, Kiribati, Vanuatu and Tuvalu) (Organisation for Economic Cooperation and Development, 2018b).
This lack of diversification in SIDS economies means that their domestic revenues can be erratic, particularly as their production bases are often concentrated in sectors that are vulnerable to external shocks â as we have seen with the impact of the Covid-19 pandemic on tourism â and are then at risk of large fluctuations in domestic and tax revenues.
In Timor-Leste for example, tax revenues accounted for 133% of GDP in 2012 but then fell to 40% in 2015 (Organisation for Economic Cooperation and Development, 2018a). This level of fluctuation makes government planning, particularly around long-term and large-scale infrastructural development, extremely difficult.
These narrow economic bases and volatile national revenues result in a difficult balancing act for SIDS governments â caught between the desire to develop levels of social, cultural, educational and physical infrastructure and the requirement to take on more national debt to achieve that.
The impact of that of course is that debt sustainability becomes a problem when any shock to the economic system occurs, such as we have seen with the loss of tourist revenue due to the Covid-19 pandemic. The ability to repay those debts impacts on creditworthiness, thus restricting access to capital markets and increasing the costs of any future borrowing.
In the Maldives for example, public debt was already at around 59% of GDP in 2018, and according to the World Bank-IMF debt sustainability analysis (World Bank/IMF, 2019), Maldives was at high risk of debt distress then, with particular emphasis placed on the risks of fiscal slippage and a decline in tourism. That has now come to pass and the effect of the collapse of the tourist market in the first quarter of 2020 on this debt risk cannot be overstated. The Maldives is not alone, and this economic situation is replicated across many island states.
Barbadosâ tourism sector contributed 44.1% or US$2.9 billion to GDP and provided 76,000 jobs in 2018 (World Travel and Trade Council, 2018). In October 2019, Barbados announced that it had reached a deal with its international market creditors, some 18 months after defaulting. That new repay...
