Meeting of Experts on Growth
and Development in Small
States
Thematic Summary
17-18 November 2011
Malta
Meeting of Experts on Growth and Development
17-18 November 2011
Introduction and Background
Thematic summary
This summary aims to reflect the key findings, suggestions for further research and policy
recommendations from the joint Commonwealth Secretariat/World Bank meeting held in
Malta on 17th-18th November 2011. It is important to note that the intention and purpose of
this summary are to present information and events grouped according to themes or topics.
Therefore, presentation and discussion sessions are not presented chronologically.
Background to the meeting
Aims
The World Bank had been researching a range of development issues for small states, such as
inclusive growth, the identification of innovative growth drivers and the benefits of regional
integration. This meeting was an opportunity to identify areas for further research and what
the current thinking was in these very important areas. The intention of this research was to
aim to inform and guide policy options directly.
Agenda
The following topics were tabled for discussion:
•
The green economy;
•
Tourism;
•
Migration;
•
Social policy and growth;
•
Competitiveness and the knowledge economy;
•
Growth and resilience;
•
Macroeconomic policy and debt;
•
Regional integration;
•
Remittances;
•
International relations and political economy.
Two to four experts gave presentations on each topic before opening the floor to general
discussion and questions.
The Chair of each session usually introduced a discussant, who
would summarise the presentations and introduce possibilities for further research. Most of
the presentations were accompanied by slides or abstracts, many of which were available to
participants online. The end of each day concluded with a more general discussion aiming to
collate
and
agree
on
future
research
projects
that
the
World
Bank
and
Commonwealth Secretariat might support.
Themes
It was noted by many attendees that several themes were pertinent to multiple parts of the
agenda. For example, towards the end of the first day, Marielle Goto detected two particular
threads emerging from the discussion on green growth – the environmental and the economic
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Meeting of Experts on Growth and Development
17-18 November 2011
– but climate change was an issue that cut across both of these, while social inclusion was an
integral component of an equitable growth strategy.
Wong Poh Poh also drew a parallel
between the green economy and sustainable tourism.
He suggested that the terms
‘sustainable development’, ‘sustainability’, ‘green economy’, etc, could all be united under
‘small island sustainability’ (SIS).
Likewise, Stefano Curto perceived a great deal of overlap between the regional integration
and international relations sections of the agenda, and how these topics might form part of
various proposals for research. Indeed, political economy could be said to pervade much of
the
two
days’
discussion.
Steven Ratuva
strongly
recommended
a
focus
on
the
implementation of any policy changes, in whatever area they might be.
Headings
The World Bank had been called upon to give more active advice on what was needed to bring
about inclusive growth, resilience and sustainability in small states.
They intended to
commission six background papers that would whet the appetites of policymakers at the
event being held in May 2012.
The draft terms of reference with an outline of the six
discussion points would be made available in April.
Those papers and that analysis would
assist political decision-making in small states, as well as helping to define the future research
agenda.
To further that aim, this document had been structured according to the six
following headings:
•
Green Growth and the Triple Bottom Line.
Tourist numbers were down while
environmental concerns threatened sustainable growth in many island countries.
•
The Losses of Migration and Benefits from the Diaspora.
The departure of trained
professionals was causing capacity problems, yet diasporic communities were well
placed to support their former countries economically.
•
Practical Ways to Build Resilience.
This section gave some suggestions to guard
against economic shocks and natural vulnerabilities, and leverage the benefits of small
states.
•
Good Governance and Economic Sustainability. Better governance and more inclusive
social policies correlated with stronger economic growth. Some individual small states
provided examples of successful governance strategies.
•
Regional Integration versus Individual Sovereignty.
Grouping together could help
these countries mitigate the defining characteristic of their smallness, either for more
negotiating power or to gain the economic benefits of scale.
Non-governmental
forums and global institutions were able to help support these plans.
•
Other Creative Ideas.
This final section grouped together the more innovative or
original ideas for how to make the most of small states’ unique characteristics.
Future meetings
As illustrated by discussions at the Small States Forum in September, members urgently
wanted to share their ideas and develop an impetus towards transforming the economies of
small states. This meeting started those processes. A technical working group meeting on
small states would be held in September 2012.
This was intended to follow up any major
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Meeting of Experts on Growth and Development
17-18 November 2011
outcomes from the second global biannual conference. The audience for this meeting would
be drawn from senior officials from the 46 small states.
Additional forums like this one were also likely to be held to assimilate all the research and
analytical work being done outside the Commonwealth Secretariat and World Bank in order to
support small states. It would help to learn the views taken by the ILO and others on key
issues, so that governments could be better advised and to ensure that efforts were not being
duplicated.
Background to small states
History
The Small States Forum was established by the World Bank in 2000.
Its last meeting, in
September 2011, had debated issues around debt in small states, focusing primarily on the
Caribbean
region.
The
Forum
also
looked
at
areas
of
possible
knowledge-sharing in the context of debt management policies.
cooperation
and
It also illustrated the
willingness and urgent concern of small states to share their ideas and develop more impetus
towards transforming their economies. This meeting’s work would start those processes.
The Small States, Environment and Economic Management department of the Commonwealth
had been following a dedicated work programme of policy research and consensus-building
around issues that had faced small states for nearly 30 years. Over half of Commonwealth
members were small states in Africa, the Caribbean, Pacific and Indian Ocean.
Definitions
The Commonwealth had defined small states within its own membership as those countries
with populations less than 1.5 million.
times.
Different GDP thresholds had also been applied at
The World Bank’s databases defined small states very specifically.
They made up
about 20% of all UN members.
Some people did not like the phrase ‘small states’. The last Small States Forum agreed to call
them ‘smaller states’, but work spearheaded by Malta and the Caribbean had largely
superseded these concerns. Now was the time for major research institutions and scholars to
come together and engage in the ideas of tomorrow, without being distracted by matters of
definition.
During the discussion, an objection was made against the assumption that all small states
knew who they were and spoke with the same voice. There was the possibility of building a
framework from the specific commonalities they shared and using this as a way of focusing
research and thinking.
However, it could be difficult to attain cross-regional comparability,
and this work might be more complex and politicised than first realised. Sudarshan Gooptu
accepted that ‘small states’ ought to be defined as a term of reference at the beginning of any
research work or policy recommendation, so as to avoid the discussions they led to becoming
too confused or distracted.
Africa
Students of small states often avoided talking about Africa, because it caused some
difficulties.
Rose Azzopardi conceived of 11 small states in the region; Donna Lee thought
there were 15. There were many small African countries aspiring to be members of the WTO,
indicating its importance to small states in Africa; 11 of the 15 small states were already
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Meeting of Experts on Growth and Development
17-18 November 2011
members. African small states formed a very heterogeneous group making it difficult to come
to a consensus view. They were all affected by different conditions. Some were very small
islands; others were land-locked. There was definitely opportunity for further conversations
about the comparability between the Africa group and the Caribbean and Pacific.
Global support
The Commonwealth’s Heads of Government had met in Perth in early November. Building a
programme of global advocacy on the concerns of small states was very high on their agenda.
Other issues discussed were: ways to work together to secure global economic recovery;
green growth trajectories; maximising the social and economic benefits of migration; reducing
the cost of remittances; and investing in the social fabric of small states, especially through
youth and women. This meeting of experts was part of an early response to the Heads of
Government on some of these key issues.
Diplomatic engagement
Winston Dookeran, as one of the opening speakers, outlined how international diplomacy was
changing, and there was a need for small states to engage differently. The World Bank and
the Commonwealth Secretariat were entering into a new phase, where development was
taking a principal role in the world agenda and new global actors were coming to the fore.
Traditionally, small states’ small voices and unique problems did not suit the international
system – they were the recipients in the diplomacy of the past – but the world order was
being completely redeveloped. Participation was now not about protest, but creative solutions
that would help shape the world economy.
bastions of hope for new ideas.
Godfrey Baldacchino described small islands as
They were able to lend themselves to experimentation to
construct smart solutions that might be used in larger states with more complex agendas.
Many islands were afraid that the international community’s interest in them would wane in
the post-Cold-War period, but now they were seeing a renaissance. Small states were able to
shape trade governance processes; they were becoming subjects rather than objects of
negotiations.
Development was something to be done, not something to talk about.
Policies would not
work individually but had to be accompanied by a framework for action. Winston Dookeran
also observed a decline in multilateralism in international relations. As a result, ‘multi-track
diplomacy’ had emerged. It might be necessary to redesign the platform for cooperation in
development.
Green Growth and the Triple Bottom Line
Relevant presentations
•
Marlene Attzs discussed issues salient to the sustainable development of small island
developing states (SIDS).
•
Wong Poh Poh titled his presentation, ‘Proposed adaptation measures for small island
states’.
•
John Roberts attempted to find a green escape route out of the middle-income trap.
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Meeting of Experts on Growth and Development
•
17-18 November 2011
Mark Griffith looked at the interface between sustainable development, environmental
sustainability and transformation to a green economy.
•
McHale Andrew addressed tourism’s contribution to the Caribbean economy.
•
Mark Hampton discussed responsible and sustainable tourism.
Sustainable development and green growth
History
The concept of ‘sustainable development’ and its three pillars had existed before the
Brundtland Commission, but this body had highlighted the term globally and it had then been
institutionalised
at
the
UN
Conference
on
Environmental
Development
(UNCED).
Environmental sustainability was the seventh Millennium Development Goal (MDG), and a
critical aspiration for the Caribbean.
Definitions
There was some complementarity between the concepts of a green economy and that of
sustainable development. To ensure a sustainable development trajectory it was necessary to
consider economic growth’s impact on the environment.
The green economy concept was
similar in that it linked economic growth to the creation of employment and eradication of
poverty.
socially
Economic progress should be connected to low-carbon strategies but also reflect
inclusive
development.
Marlene
Attzs
mentioned
the
work
undertaken
by
Mohan Munasinghe, who had talked about a three-pronged approach including economic,
social and ecological objectives – the triple bottom line. John Roberts, however, stressed the
need to decouple economic development from carbon usage.
Mark Griffith argued that sustainable development, environmental sustainability and the
transformation to a green economy were not different things. However, some Latin American
and Caribbean countries did not necessarily support the goal to transform to a green
economy.
Janet Strachan recalled how, during the regional meetings for Rio+20,
policymakers had been unsure about whether to transform to a green economy. This meeting
aimed to ascertain whether a green economy could deliver on a range of areas, including
livelihoods, employment, poverty reduction, equitable development, and food and energy
security. This uncertainty was causing people to hesitate to move forwards on this agenda.
A new paradigm
A fundamental shift was needed in the way that policies were designed as they related to the
environment to include economic and sociocultural elements. In most cases in the Caribbean,
policy choices had always treated the environment as an externality. The new paradigm had
to address the environment as a key element of development for the region. Development
had to be defined more widely than one-dimensional economic advancement, on which so
many international financial institutions focused.
Holism and participation
McHale Andrew encouraged the need to focus on a triple bottom line of economic, social and
environmental growth, alongside a new paradigm. However, he perceived that the Caribbean
took a rather esoteric approach to sustainable development of ‘us’ versus ‘them’, the
environmentalists versus the developers, a point to which Marlene Attzs added her
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Meeting of Experts on Growth and Development
agreement.
17-18 November 2011
Small states should embrace a more holistic approach, and avoid focusing on
‘the green economy’ when issues around sustainable development were still unresolved.
A more participatory approach was needed that would optimise the region’s natural attributes,
was more community- and people-centred and that would create intersectoral linkages. Such
an approach would link to the aforementioned concept of the triple bottom line, which should
be supported by the UN Environment Programme (UNEP) and corporate social responsibility
(CSR) policies.
These elements spoke to the issue of governance and the promotion of
non-economic social values.
The business justification for CSR was the Deming philosophy
that stated that a focus on quality would tend to show quality increases over time while costs
fell; while a focus on costs would inexorably show costs rise and quality decline.
Economic models
Anthony Birchwood recalled a presentation on T21 models. The idea was to incorporate the
environment into macroeconomic planning by being able to quantify that environment. SIDS
could, for example, augment the way they measured GDP by also showing environmental
degradation. Some economists had been advocating national green accounting, particularly
for those economies that were heavily dependent on the environment. This was more crucial
when non-renewable energy resources were being depleted.
Trinidad, for example, had
recently been trying to incorporate this into their macroeconomic planning.
This proposal
gained support from others. Such a strategy was currently being endorsed in the Seychelles.
Lino Briguglio was hopeful for the possibilities of an enlarged tourism sector that was linked to
other economic activities.
Institutional bodies and control
Many states were now required to conform to institutional frameworks, including the MDGs,
the Kyoto Protocol and the Rio Declaration of 1992. The Committee on Trade and Economic
Development (COTED) held responsibility for sustainable development and environmental
protection in the Caribbean Community (CARICOM). The Barbados Programme of Action and
2005 Mauritius Strategy both dealt with sustainable development for SIDS.
Many countries in the Caribbean were now focused on integrating environmental sustainability
into the UN Development Assistance Framework (UNDAF). An attempt was being made for all
UN agencies to engage these countries jointly as opposed to through individual agencies.
The middle-income trap
One of the problems with middle-income status was that, having progressed from lower
income by developing primary education, basic infrastructure, low labour costs, primary
health services, water and sanitation, if more was provided a country could stay trapped. To
move on from the middle-income trap, they needed greater efficiency, less corruption and
more research and development.
Ecological footprint and human development
There was a match to found between a sustainable ecological footprint and human
development that would combine expectations for education and income.
The many small
and medium-sized countries, in terms of both human and income development, must keep
within ecologically sustainable limits of around two hectares of land per person. Singapore
had to re-track its ecological footprint and biodiversity without losing any of its human
7
Meeting of Experts on Growth and Development
development.
17-18 November 2011
The challenge there was to look at adoption strategies, whereas for many
other countries the main strategy was to promote human development.
Others needed to
maintain their current position; some required social intra-development.
A green economy
Several countries had adopted various approaches to transform to a green economy.
For
example, one concept was called, ‘Transformation of Dominica into an environmentally sound
organic island’; and Guyana was talking about a low-carbon development strategy.
The
conclusion of discussions at COTED had been that countries first needed to define exactly
what they meant when they spoke of a ‘green economy’.
It could offer a pathway to sustainable development and poverty eradication by including well
planned urban areas and sustainable livelihoods.
Countries with restricted populations and
resources had to offer high-value low-volume tourism, which was both what the Caribbean
sought and something compatible with a green economy.
Anguilla, St Lucia and Barbados
were attracting ethnocentric visitors – high-net-worth individuals willing to spend more
money, who tended to be recession-proof, and who visited to enjoy the culture, cuisine, art
and so on.
Some specific green initiatives included waste management schemes such as
composting, recycling and using waste as fuel. There was also a need to be more energyand water-efficient.
Energy
Vince Henderson drew attention to the importance of energy in achieving economic,
sociocultural and environmental sustainability.
Innovations in renewable energy could help
SIDS deal with their economic challenges like very high debt-to-GDP ratios and reduce their
dependence on importing fossil fuels.
There were also still a number of people on small
islands who did not have access to electricity or gas energy. Women were usually the ones
who had to provide those basic needs for their families, and they needed to be better
empowered.
By generating their own electricity, especially from renewable sources, small
islands would reduce their carbon footprint, make development more sustainable and help
move towards that green economy.
Guyana had long had a history of championing renewable energy, particularly solar energy in
rural communities. The Caribbean Development Bank (CDB) had funded much of this through
its Basic Needs Trust Fund (BNTF) programme.
Many other communities were lagging
behind, although Trinidad and Tobago had in fact put significant fiscal measures in place to
try to encourage people to use more renewable energy. Public education could certainly help
show that non-renewable resources would not always be available.
Climate change
Outline
The Intergovernmental Panel on Climate Change (IPCC) had identified climate change as the
single greatest threat to sustainable development in island states. Lino Briguglio perceived of
it as the one link between the four presentations on the green economy. It was important to
afford this topic reasonable importance within the debate.
There was a need to make
approaches to climate change adaptation mainstream rather than tangential in any country’s
economic development, whether green or otherwise. The adaptations to climate change that
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Meeting of Experts on Growth and Development
17-18 November 2011
small states and SIDS were making had not featured that prominently in the discussions and
were not always clear.
Biodiversity
The small range of land resources in small island states was under stress as a result of
climate change impacts.
Rising sea levels
Sea level rise (SLR) was predicted to be 9-88 cm by 2100, but these figures were an
understatement, as very little was known about the complex processes involved in ice sheet
melting and glaciers. All the different projections agreed on a rise well beyond one metre by
2100.
A New Scientist article from October revealed that the world’s number-one climate
sceptic had at last accepted the existence of climate change.
The IPCC had composed a set of adaptation strategies. If you could, retreat to higher land.
If you could not, build bigger houses and protect yourself by constructing sea walls. The UN
Framework Convention on Climate Change (UNFCCC) had supplied a table of traditional and
modern measures to adapt to SLR, although many were expensive to adopt.
The blue economy
Stefano Curto thought small island states should also be looked at in terms of the blue
economy, with all the water surrounding them. He suggested that the sustainability of the
fisheries sector was worth studying, in terms of food security, the environmental impact and
licences being given away.
This might have important implications for the future of these
countries and even a global impact. These states had a very high dependence on marine or
coastal activities, not just those located in the ocean. The blue economy was one of the few
sectors in which small states could truly achieve the multiple gains that the green agenda was
seeking – growth, labour creation and environmental benefits.
It was the ideal basis to
explore a regional solution. Mark Griffith commented that the concept of the green economy
already included the marine sphere, and too many labels could confuse policymakers.
Stefano Curto had only wanted to give due emphasis to the fact that many small states were
islands.
Gender
It could be argued that women would suffer more than men as a result of climate change.
The first areas likely to be affected by SLR were beaches, which would affect tourism – a
sector that employed a disproportionately large number of women.
The participants were
warned that any employment or adaptation strategy that did not reflect the mainstream
gender perspective could stop green growth from being achieved in the intended way.
Tourism
Wong Poh Poh detected a general acceptance that climate change was the biggest challenge
to tourism and its related sectors, yet the literature contained little commercial information on
how tourism companies could incorporate climate change considerations into their strategic
planning.
The reason for this was the risk of making companies vulnerable.
Instead they
would just adapt quietly and divest their high-risk assets. Researchers or consultants might
be able to find out how this was being done, but then might not reveal it, as companies
9
Meeting of Experts on Growth and Development
17-18 November 2011
needed to use any competitive advantage to improve their position in the marketplace. The
bigger participants in the tourism industry had some advantage.
Tourism
Overview
Janet Strachan divided the tourism debate into two parts: one concerned improving the
competitiveness of the industry itself: the growth agenda; the other was about the flexibility
of human resources and infrastructure: the resilience agenda. Comments were made about
the context of tourism today and how there was high dependency on it, there were challenges
in the middle market and little native ownership of tourism plant. The resilience agenda had
to be weighed against growth drivers in assessing the true cost of tourism.
Other
considerations were the efficient use of water and fuel resources, the integration of other
sectors into the tourism industry, transportation options and hotel capacities. This meeting
had discussed both the need to diversify tourism into perhaps deeper sectors but also to
maintain wider economic diversity to avoid Dutch disease.
Global trends
Tourism had become ever more important to the global economy, rising from 25 million
visitors globally in 1950 to a peak of 922 million in 2008.
Diversification had taken place,
with North America, Latin America and the Caribbean emerging as destinations, and people
visiting an increasing number of countries.
Global model
The global economic model was one of debt-fuelled over-consumption, co-existing with high
levels of poverty and unemployment, as well as social and economic inequality. Alongside a
global recession influenced by corporate greed could be seen a dichotomy between
environmental and traditional development, instead of embracing them both as sustainable
development.
Alternative thesis
Tourism was nothing more than an expansion of a country’s market size, but this was
important for small resource-poor population-restricted countries. Any person or institution
that could produce a competitive good or service could sell to that expanded market, as if
exporting within their own borders. Tourism’s benefits were thus direct for the people and
institutions working within the sector, and indirect for other sectors selling goods and services
to the tourism sector. Induced benefits resulted from people earning incomes from tourism
enterprises then spending that wealth in other sectors.
Economic uncertainty
Tourism was predicated upon disposable income in generating countries and that was
somewhat problematic when generating markets were under huge economic pressure.
Uncertainty was occurring at both the point of origination and the destination. The UN World
Tourism Organization was cheerfully talking about surpassing the 1 billion barrier for
international arrivals next year, while the World Tourism and Travel Council had downgraded
their growth forecast to 3%.
The complexity of the unfolding euro crisis was making
predictions even harder to make.
The austerity in mainland Greece might lead to cheaper
holidays; conversely, worsening social unrest was causing people to take their bookings
elsewhere.
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Meeting of Experts on Growth and Development
17-18 November 2011
Relationship with other sectors
Industries like agriculture and fisheries supported tourism, but there was an issue about how
to incorporate local supply and procurement in the local value chain to ensure all sectors
benefited. There were two issues worth highlighting for more ‘advanced’ sectors, like tertiary
and service industries, and offshore finance. The first was the intense conflict between tax
and financial industries over land, labour and capital, leading to some real problems in small
state and island economies. This was the old ‘Dutch disease’ of the crowding-out effects of
labour, land and capital from a booming sector within small-island and state economies.
Tourism was somehow portrayed as the poor relative of financial services.
Financial tourism
There was a problem with financial services dominating an economy. In Jersey, 80-90% of
the GDP was driven by financial and tax haven activities, which closed off opportunities for
diversification.
When economies over-specialised, they prevented themselves from doing
other things, perhaps depleting local entrepreneurialism as well.
Vanuatu was cited as another tax haven. It did not tax locals or foreigners at all. Many of
the other island countries that wanted to become tax havens – such as Samoa, the Cook
Islands and Tonga – had now been named and shamed by OECD. Vanuatu was joining the
WTO and trying to improve its economic relations with Australia. Soon it would be forced to
introduce direct taxation, because free trade meant important duties would have to be
slashed. Another effect of the recession could be a fall in the number of retirees moving to
New Caledonia, Vanuatu and Fiji.
Tourism therefore appeared to be a better option than
international finance for many small island countries.
Inequalities
Tourism was the economic backbone of many SIDS, and it was a sector dominated by female
employment, yet it was extremely vulnerable to the impacts of disasters and rising sea levels,
as well as the economy in visitors’ countries.
There was a high incidence of poverty and
unemployment among women compared to men in Trinidad and Tobago. In other Caribbean
countries, women were more heavily employed in services, primarily the tourism sector, but
under-represented elsewhere in the region. These disparities were growing and needed to be
addressed to achieve sustainable development or green economic growth.
John Roberts
encouraged greater awareness of intra-national equity issues within countries, such as gender
and social inequities, which needed to be greater explored.
Geographic trends
Asia-Pacific and Caribbean islands were likely to have fewer problems than some European
and Indian Ocean destinations. Regional tourism might be replacing the standard long-haul
model.
At the same time recovery from economic turbulence was accelerating in parts of
Asia-Pacific, Australasia and East Asia compared to the core European countries.
The
Caribbean might also have the opportunity of developing tourism from some Latin American
markets, particularly Brazil.
Visitor trends
The tourism market had expressed concern about this change in global spread. At the high
end, the wealthy would still travel. At the other end, the independent and budget travellers
would also continue, not knowing whether they had a job at home during these times of
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Meeting of Experts on Growth and Development
17-18 November 2011
uncertainty. The bigger concern was the mid-market, which contributed the largest volume.
With falling demand and falling spend in destinations due to people worrying about their job
and mortgage, this could be incredibly serious for the mass mid-market.
Mass tourism –
seeking sun, sea and sand – was clearly driven by price. Customers were more interested in
how cheap they could make their holidays than where specifically they were going, which
made integrating sustainability problematic.
The importance of tourism to the global economy would persist for as long as people
continued to move from one place to another. The largest single destination country in the
world was France, and the largest destination city was New York, yet you hardly heard these
places talk about tourism. Their transient populations were just expansions of their existing
markets. There was an argument for the Caribbean and other small states to follow this view,
and thus gain a greater appreciation of the need to make connections between supply of
goods and services to an expanded market, and resolve much of this imbalance.
Global linkages
Whatever
happened
in
other
parts
of
the
world
would be
transmitted
elsewhere.
Sudarshan Gooptu worried that the global environment was moving in the wrong direction.
The basic policy implication seemed to be that a tourist company or cruise enterprise should
be taxed more to cover the environmental costs of their industry.
It was unlikely such
competitive companies would agree to this. The role of the political economy was perhaps
inseparable from the tourist industry. Mark Hampton believed more work was needed on the
political economy, by which he meant where power resided and who gained most from it.
Political influences
The tourism sector was an unbalanced economy with huge amounts of external ownership.
Tour operators, airlines and cruise companies could exert their power over whichever
destinations they chose.
Sustainable tourism
All seemed agreed that islands and small states desperately needed to build sustainability into
their policy planning frameworks. At the mid-to-high end of the tourism market, there was a
growing willingness to pay for so-called ‘sustainable’ or ‘responsible’ tourism, which incurred a
premium and helped modify behaviour. The upper market segments were often paying eco
taxes on scuba diving trips or higher rates to enter national parks. This was accompanied by
a clear trend towards ‘experiential tourism’, expressed as a greater interest in the provenance
of the food on the table, the local culture or wildlife. The concern was whether the ambitions
of sustainable tourism would be compromised by price.
Democratised tourism
McHale Andrew had raised issues of tourist leakage and the concentration of investment.
Another participant had seen that in the tourism industry leakages and concentrations came
mainly because of monopolies.
One approach to tourism could be to take it down to the
village level and get everybody involved in preparing ethnic food or joining in cultural
activities. This would really democratise tourism and bring in new investors. To do that, one
had to take the industry to the people.
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Meeting of Experts on Growth and Development
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Inclusive tourism
The Arab Spring had revealed discontent with exclusive growth, where people were not seeing
any returns coming to them. This had destabilised the whole system. It would be interesting
to see whether the tourist industry was contributing to inclusive growth and if government
policy would introduce plans for economic diversification to different kinds of business lines.
Were the maximum number of people within a country being employed or affected in a
positive way by gains in the sector or instead were powerful industries controlling it through
monopolies?
There was some potential to facilitate regional cooperation between different
countries in the Caribbean or in other blocs of small states.
Competition between little
countries would negate the economic benefits of scale.
Terrorism and crime
Wong Poh Poh suggested some consideration of the terrorist threat to tourist numbers,
following 9/11 and related events. Tourism of any kind was sensitive to political instability,
crime and violence.
Case studies
Caribbean sustainability
Caribbean economics were demonstrating unsustainable development or ‘brown growth’.
They were suffering from high debt-to-GDP ratios; they were relatively undiversified; and
tourism inflows were slowing after the global financial crisis. The Caribbean demonstrated an
extreme level of dependence on tourism generally, and this sector made few linkages with
others. This had been attended by countless socioeconomic and social crises in the region,
not least among them crime, social dislocation and unemployment.
There were higher levels of female unemployment in many of these economies.
Chronic
youth unemployment – between 20% and 40% in some countries – was linked to increasing
levels of crime. High levels of poverty were causing challenges to healthcare. The Caribbean
was also highly vulnerable to natural disasters, which had economic consequences.
The
threat of climate change was exacerbating all of these problems.
Caribbean tourism
Although a significant part of economic activity for almost every country in the world, of the
10 most tourism-dependent countries, seven were from the Caribbean.
Tourism provided
11% of jobs in these countries, against a world average of 6-7%. It had accounted for 12.8%
of Caribbean GDP in 2009, against 5% elsewhere.
Tourism was also very important to
exports and investment. In Antigua and Barbuda, tourism made up almost three-quarters of
the GDP; whereas in Haiti and Suriname, it was 4.2% and 5.8%. Research was in progress to
measure the level of tourism penetration against that of the competitiveness and economic
development of these countries.
Competitiveness was an indicator of market share. In the 1980s, the Caribbean had held 1%
of the world’s population but 4% of global tourism arrivals. Now, although absolute numbers
had increased, their market share had declined to 2.3%. The reality was one of extremely
high levels of import leakages in Caribbean tourism economies and weak intersectoral
linkages. There was a general ignorance of tourism’s benefits, and a large percentage of the
sector was foreign-owned. In addition, there were huge inefficiencies in the way the sector
used water and energy, and structured its costs.
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Meeting of Experts on Growth and Development
17-18 November 2011
The sector needed to optimise the relationship between the demand for goods and services by
visitors and the domestic supply of those goods and services.
It had to minimise the
deleterious effects on the environment and the region’s natural resources, while consistently
offering a competitive product that reflected countries’ cultures and aspirations, and while
also generating employment. A tendency of the Caribbean was to agree on policies but falter
at their implementation – the danger of ‘malicious compliance’.
Dominica
The idea of an organic Dominica was to use the sum total of the island’s resources to develop
an approach that would lead to sustainable development.
This included natural resources,
sustainable agriculture, eco-health, eco-tourism, and social and economic development.
Barbados
Barbados had used a scoping study to look at the policy interface between the environment
and agriculture, energy, etc, as a means to work towards a green economy.
Guyana
Guyana had initiated numerous projects to help achieve low-carbon development, such as
developing land for the Amerindians, electrification for Amerindian countries, hydroelectricity
and institutional strengthening.
Gozo
The island of Gozo in Malta had been declared an ‘ecological island’ and was given some quite
specific targets to use less energy.
The people who lived there were asking if they were
necessary. Very often, particularly at times of high unemployment, it had been questioned
whether sustainable development really meant losing jobs. The existence of targets alone did
not always define what needed to happen.
Maltese Tourism
Malta depended very highly on tourism and had a high penetration of visitors relative to its
land area, but industry-funded consultancy work had caused all sorts of exaggerations.
Consultants had said that tourism in this country contributed to 40% to the economy, but
economists had estimated it at more like 12%.
Fiji
In addition to the recession, domestic problems were also creating adverse publicity, such as
the devaluation of the Fijian currency in 2009.
This had caused international hotels to
announce discounts, bringing in more arrivals, leading to heavy sanctions being imposed.
Fiji’s visitor numbers had declined during the recession, but were now recovering.
At the
same time, its Government was aware of forward and backward linkages and was investing in
the commercialisation of agriculture to feed the tourism industry. This had opened a window
of opportunity for Fiji.
Practical suggestions
Safe islands
Maldivians had long been saying that their islands were going to disappear in 100 years.
Wong Poh Poh’s proposal was to adopt a ‘safe island’ concept, in which people would be
relocated to the larger islands with better protection, higher ground and taller houses.
He
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Meeting of Experts on Growth and Development
17-18 November 2011
encouraged the Maldives to leave 600 of their 1,200 islands now in order to ensure the safety
of their people for the next 100 years.
Mangrove plantations
Wong Poh Poh also suggested planting more mangroves. A study from 2008 had proved that
mangrove growth, in a triangular, rectangular, square or hexagonal pattern, could slow down
the effects of SLR.
As well as offering protection, the Avicennia marina had potential as a
food source and helped in the restoration of degraded coasts. Wong Poh Poh had published a
study detailing these benefits in the 6th November edition of New Scientist.
Lino Briguglio
supported disseminating this idea to small tropical countries, but pointed out that it would not
help those who lived in areas where mangroves did not grow.
Three pillars framework
Mark Griffith had produced a framework that attempted to unite the three pillars of
sustainable development and the environment, social culture, and the economy, to avoid any
confusion from a political perspective. This model provided a useful starting point to identify
what areas SIDS needed to address. It also emphasised the policy interface, so these ideas
could be extended to considerations of multilateralism or how states should be acting
internationally. Lino Briguglio approved of the policy framework as a way to indicate whether
progress was being made towards the pursuit of sustainable development, however it was
described.
Natural disasters
Mitigating the effects of natural disasters and finding new ways to fund emergency situations
should be examined, as currently these issues were being addressed in an ad hoc manner and
help from agencies was indirect. A much more aggressive or creative policy position could be
taken to deal with these problems and manage the risks.
There had been two earthquakes of equal strength in 2010. One had been in Haiti; the other,
in Chile. One had many thousands and the other, only a few. Hence disaster management
was also part of good economic governance, so these issues needed an all-encompassing
term.
Economic success was equivalent to good governance, and comments about
corruption, fiscal prudence and the rule of law were all related.
Dialogue with policymakers
There needed to be more honest dialogue with policymakers on the costs of some tourist
sectors, rather than spurious industry-led research.
Other development paradigms
This group could promote discussions among policymakers about their own development
paradigms and how they accounted for the shortage of land in small states, but allowed the
increasing intrusion of the built infrastructure. The beauty of these islands was at the root of
the happiness and satisfaction of the local population.
A way forward
During the final discussion on the first day, Janet Strachan suggested a possible way forward
was to set out a typology of policy approaches closely mapped to some of the policy
objectives being
expressed.
They would
focus
on growth, equitable development,
environmental security and sustainability. In this way, the group could both learn the lessons
15
Meeting of Experts on Growth and Development
17-18 November 2011
of those activities and also look at policy approaches that were specifically tailored to small
states.
Research suggestions
Sustainability data
Marlene Attzs suggested gathering more data on gender, disaster management and
sustainable development policies.
The Caribbean needed to look at using appropriate
indicators that would reflect the unequal vulnerabilities in its communities, and thus help
create appropriate strategies to achieve sustainable development and green economic
growth.
The green economy
Mark Griffith thought research was needed to define what approached helped create a green
economy.
This might help bridge different governments’ perspectives.
Vince Henderson’s
primary research ambition concerned green growth. This captured the tourism initiative and
energy components too. This suggestion was later adapted to focus on sustainable tourism,
which captured environmental and alluded to economic and social inclusiveness. Projects on
renewable energy needed to be promoted in energy-poor states. The concept of sustainable
tourism also provided a space to explore alternative kinds of tourism, which would lead to
economic diversification.
The World Bank was already working on energy regulation and
renewable production in the Caribbean.
Sharing best practices in tourism
The bulk of the people present at this meeting were not from the business world; they were
policymakers, governors and researchers. Some lacked experience of how to run a tourism
industry, particularly how to do that sustainably. Instead the best practices of the Caribbean,
South Pacific, Southeast Asia and Indian Ocean islands needed to be shared to improve the
green economy, governance, gender, etc. However, the compilation of a handbook would be
very useful.
Maybe the Commonwealth Secretariat and World Bank could consider putting
together something like that. An additional point was a request for more knowledge about
the real tourist demand in small states. It could isolate whether tourists were interested in
food or culture, for example, then this information could be used to aid marketing campaigns
and suppliers.
Common features of small states
Many small states shared some common key attractions. Research could assess how those
attractions could best be provided within the framework of either domestic or regional
solutions.
It could explore the capacity constraints that were peculiar to small states,
whether institutional, knowledge-based or financial, and how to overcome them.
Tourism and other sectors
Mark Hampton proposed more research into how to incorporate local supply and procurement
into the tourism value chain to ensure all sectors benefited.
Cruise tourism
Mark Hampton called urgently for independent research on the impact of cruise ships and
others echoed this request. Knowing the number of visitors was unhelpful without knowing
how much they were spending.
Often existing research would be driven by the industry,
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Meeting of Experts on Growth and Development
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which would overplay the economic benefits for island and small-state destinations and
downplay the significant environmental and social costs of this particularly difficult segment of
international tourism. More rigorous research was required to look at where the money was
going as opposed to the propaganda.
McHale Andrew had studied cruise tourism as part of his work as a researcher for the
Caribbean Tourism Organisation (CTO).
One of the issues explored was that of business
arrangements with the ships and the extent of their contributions.
However, the
Florida-Caribbean Cruise Association (FCCA) had decided at the last minute not to participate
in this project.
The conflict there was that the FCCA was interested in painting a heroic
picture, but cursory examinations showed that it was uneven.
For instance, cruise-related
attractions were charging independent people $45 for a package, and the cruise lines were
charging $75 wholesale and only paying $25 to the destinations. In many instances some of
those attractions were operating unprofitably. It was very important to return to some basic
questions about who was winning and losing in small economies.
High-profile tourism
Many tourism ministries were interested in several sectors for which little applied independent
research existed.
These included marinas, where much of what had been written was by
consultants with financial interests.
A lot more work was needed on dive tourism, yachts,
culture and heritage showing where the money was going and the benefits for small-state and
island communities.
Godfrey Baldacchino backed these requests for more independent
research.
Sustainable tourism
It could be argued that tourism was a fundamentally unsustainable industry, as it involved
travelling across the world expelling large amounts of carbon. Urgent research was required
on more sustainable transport forms.
At the destination level, there should be greater
encouragement of and access to capital for green energy forms, eco resorts, etc.
Comparative research programme
There was also a clear need for an international observatory or comparative research
programme for tourism in islands and small states.
Humanitarian and ecological development
A suggestion from John Roberts was for research that focused on two or three examples of
countries that differentiated their relative position according to human and ecological
development. Godfrey Baldacchino wondered whether it was possible to identify a sector or
sectors that illustrated the challenge of controlling ecological footprints.
These were
potentially very idiosyncratic small-state issues.
The Losses of Migration and Benefits from the Diaspora
Relevant presentations
•
Godfrey Baldacchino had titled his presentation ‘Strategic Flexibility, International and
Intersectoral Migration, and the Economic Development of Small Island States’.
17
Meeting of Experts on Growth and Development
•
17-18 November 2011
Patsy Lewis summarised an article published recently in the Journal of Social and
Economic Studies looking at the challenges to nurses migrating from Jamaica and the
policy approach the Government was taking.
•
Jessica Jones talked participants through her research into strategic opportunities for
Caribbean migration.
•
Steven Ratuva’s presentation on enhancing the knowledge economy in Pacific island
states alluded to repatriating diasporic learning.
•
John Connell gave some background to remittances and focused on the situation in
Tonga and Samoa.
•
Kenrick Hunte outlined some features of remittances and specific issues that
Commonwealth countries needed to consider.
Migration issues
Types
There was a distinction to be made between immigration and circular migration.
migration was temporary; people left only to make money.
Circular
Immigration was more
permanent and a deeper problem, both for the host country and the country sending the
brain- or manpower. It was suggested it might help to examine arrangements in American
Samoa, which was effectively a sub-national jurisdiction tied to a colonial power neighbouring
a sovereign state. There was a lot of crossover between American Samoa and Samoa, which
might help conceptualise circular migration, as employment regulations made it possible to
live in one country and work in the other.
Intersectoral
Godfrey Baldacchino proposed a different approach from the familiar sense of migration of
moving from A to B, either permanently or temporarily, with a more domestic consideration of
what it was. Intersectoral migration suggested the movement of individuals across economic
sectors as a way of responding strategically to opportunities.
This entailed the ability to
connect with different sectors of the economy at the same time while retaining a specialism.
This was inherent to the intersectoral application of the word ‘migration’.
Migration, remittance, aid and bureaucracy (MIRAB)
Naren Prasad related how he had personally witnessed policymakers learning from
Godfrey Baldacchino’s research. They used to employ the MIRAB model, but this had been
superseded by the profit model outlined.
Capacity problems
Patsy Lewis questioned the assumptions of the model the Jamaican Government was using to
invest in training nurses to cope with the additional demand from abroad. Would there be
enough people willing to stay to satisfy local demands? Other sectors of the economy could
suffer should a country with a small population chose to redirect large numbers of people to
one area of the labour market.
Original models
The Philippines and India had designed the original models for the export of skilled workers,
but these models were now failing. Both those two countries were today turning to medical
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Meeting of Experts on Growth and Development
tourism.
17-18 November 2011
Small states, particularly in the Pacific, often lacked sufficient numbers of
high-school students to meet their demand for nurses and other skilled workers.
Demographic issues
The issue of migration was as old as humanity itself. Places like Samoa were being used to
produce future migrants, leaving their country with only the very old and very young
remaining.
Their villages were thus sustained by remittances, but these payments were
unlikely to address all of the social consequences.
New Zealand than in Samoa itself.
There were more Samoans living in
Naren Prasad questioned whether it was acceptable to
allow such countries to continue as producers of future migrants. What effect would this have
on their productive capacities? He referred to a paper about New Zealand profiteering from
immigrant nurses, and asked what destination countries should be doing to help those
producer countries. The counter-factual question also needed to be addressed: what would
happen to unemployment and poverty rates if migration, particularly of skilled workers,
continued?
Knowledge economy
The large number of migrants was a concern for the Pacific area.
migrants were Australia and New Zealand.
The major recipients of
When people moved, they would also create a
new knowledge economy in the places where they chose to reside.
People usually left the
islands for the purposes of education or employment, and then would develop and sustain
Pacific island communities in their new homes. They were often highly educated people, but
little of that knowledge would be sent home.
What went back instead were remittances.
Training, and research and development were vital in a country making the transition from
middle- to high-income.
Access to migration
Guadeloupe, Martinique, Niue, the Cook Islands, Puerto Rico and Montserrat could all take
independence if they wanted it, but they preferred to retain their privileged access to the
metropole.
Some countries closely protected their ability to migrate as an important
resource.
Managed migration
The concept of managed migration acknowledged that people could not be prevented from
departing, so migration was better perceived as a source of income. There should be some
reciprocity to this: skilled labourers migrating from countries should repay some of their
training costs or somehow ensure higher levels of return migration.
Usually this did not
happen. Managed migration existed in much smaller countries than Jamaica, like St Vincent
and Kiribati, where the issues were very serious.
Simultaneously, the Commonwealth Secretariat had been facilitating and regulating the
migration of teachers and health workers, while the WHO Global Code was doing the exact
opposite.
There were two tensions here, one supplying and the other discouraging supply.
Some work was currently ongoing in the Pacific to encourage nurses to come back from
New Zealand to places like Tonga and Samoa.
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Meeting of Experts on Growth and Development
17-18 November 2011
Return migration
Many reports had also been written on return migration in the Caribbean and Pacific. Coming
back from countries like the US or Australia was portrayed as evidence of failure, but the
situation was perhaps subtler and more complicated than that. People were coming back to
establish businesses or move into the higher echelons of government.
involved in the economy or social life?
How were they
A really good study had also just been finished on
people deported back to Samoa and Tonga and what their contribution might be.
Connections to other problems
There were concerns that researchers and policymakers could disregard the way in which
migration and remittances were connected to the real problems in societies that forced people
to migrate – such as low growth, social inequality, crime, etc. An approach to migration must
go beyond the economic and consider factors such as growth, competitiveness and
productivity.
Continuing need
Immigration requirements tended to emphasise skilled workers, with developed countries
highlighting what attributes they most needed. In a world in which people were living longer,
nurses and other personal medical services were set to attract a lot of young people from lots
of places for a long time. Older people in the developed part of the world had the money to
pay for these services. Migration was never going to disappear, so a way to deal with these
issues had to be found.
Causes
GDP per capita was one measure, but quality-of-life indicators were also critical and a cause
of migration. When people felt they were not a benefit to their families at home, they would
find ways to leave and send remittances back. Migration and remittances were about people
and their choices – where they chose to live and work, and with whom they shared their
income.
Migration was partly a reflection of market failure, as it caused the loss of skills
when they were most needed, although limited job opportunities and a slower pace of growth
made this a necessary decision for some people.
Remittances
Significance
Remittances were significant in small states and generally more stable than commodity
exports, tourism receipts, aid flows and foreign investment.
A significant degree of
stagnation was suspected after the global financial crisis but, according to World Bank
studies, this was not as great a dip as expected.
Recipients
Volumes of remittances varied by destination.
There were also some uncertainties about
remittance flows, because many came as in-kind payments.
The recipients were usually
siblings, parents and children.
Spending
Many remittances were spent on obvious consumables like welfare, housing, improved water,
toilets, solar panels, education, improving human capital and perhaps future migration. Some
went on ‘luxury goods’, placed in inverted commas to reflect some people complaining about
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Meeting of Experts on Growth and Development
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people buying naughty things like fridges, TVs, cars and, most recently, mobile phones.
Money also went into social investment, ceremonies, churches and football clubs. Most would
argue that maintaining society was a good thing, but others would say it encouraged a more
stratified society that was less capable of change. Money increasingly went into investment,
whether in land, agriculture or small businesses, as most people wanted to use their
remittances as productively as possible.
Consumption or transformation
Most of the money migrants sent home went into consumption. Some argued for the need to
convert
the
impact
of
remittance
spending
from
the
merely
consumptive
to
the
transformational. Much of the discussion on consumption spend had been rather pessimistic,
but John Connell conceived of it positively, as bringing significant welfare gains.
Financial sector development
Financial sector development was important in mobilising savings arising from remittances.
Any surplus funds were often spent on conspicuous consumption or building projects, such as
new churches, which were a clear sign of new investments and were likely to improve
morality and lessen corruption in the future.
Education
Some alumni associations were sponsoring children by sending remittance money to pay for
schoolbooks, teachers, lessons, etc. Such an investment was building human capital.
Impact
Apart from meeting everyday needs, some countries received additional money as
international reserves. This generated risks to local production and food security, as it could
interfere with the work ethic and raise unemployment. Remittances were heavily criticised for
being part of a Dutch disease – stopping economic productivity in other words. The phrase
‘MIRAB’ encapsulated the idea that remittances, similarly to aid, generated a hand-out
mentality or wider sense of dependency.
John Connell countered that this was happening
anyway; people would continue to become more modern and move away from agricultural
activity even if remittances were not playing some part.
Kenrick Hunte added that
policymakers and donors must stop seeing remittances as opportunities for consumption and
sources of foreign exchange; rather, they were opportunities for diasporic investment and
export.
Equality
In the early years, people had said that remittances were unequally distributed. You could
see which people in a Tongan village were receiving remittances because their houses were
bigger.
Nowadays, migration had become universal, so access was much wider and there
was less inequality.
However, many other factors were affecting this.
Remittances had
certainly reduced poverty in Fiji and Tonga, as was found in some recent work by
Richard Brown.
It was also clear that they offered an effective form of social protection,
playing an insurance role in response to hazards like the tsunami.
Future
It could not be known whether remittances and migration would be sustained, but any decay
was likely to be slow.
Relatives receiving remittances would die and other close relatives
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Meeting of Experts on Growth and Development
were likely to follow migrants out of the country.
17-18 November 2011
Much of the research showed that the
amount of money sent home by migrants tended to decrease over time, simply because their
connection with home would weaken after they had paid off the loans they had used to obtain
an education and leave.
Migrant composition
Remittances were also a function of migrant composition. There was some limited evidence
from a study on nurses in the Pacific that skilled migrants tended to send proportionately
more, as a percentage and as a quantity, than unskilled migrants did. This explained why
many countries were not reluctant to lose their skilled workers. If migration should slow in
the years ahead, one would have to ask whether the second generation of émigrés would
continue to remit to the extent that their parents had.
Maximising remittances
Maximising remittances depended on maintaining migration and the Pacific’s ‘outward urge’.
People were saying that remittances were sent by people who knew about local development,
just as homeland associations did, but there was some doubt about that.
Having skilled
migrants helped, so there was a need to consider means of upskilling people to turn them into
valuable ‘gold collar workers’.
Government exploitation
Governments were perhaps deceiving themselves into believing that the costs of training
people to leave their countries would be repaid by the remittances they sent home. A proper
cost analysis had to be conducted.
Bank cards
A large prohibition to remittances in the Pacific were transaction costs, which varied from 5%
to 25% – roughly twice the global average – with Western Union charging about 14%. If dual
bank cards could be used, transaction costs would be reduced to about 5%.
Mobile phones
Jeffrey Sachs had called the phone the ‘single most transformative tool for development’, and
there was much evidence to show that he was correct.
The arrival of mobile phones and
Digicel in the Pacific could reduce remittance transaction costs to around 4%. Approximately
70% of people in Tonga and Samoa were likely to own mobile phones five years from now.
Such a system would also enable access to the rural unbanked, although there would be an
additional opportunity cost.
This system was likely to be more effective if supported by a
programme to develop financial literacy, and particularly if women were able to use phones
instead of their husbands. Another advantage of mobile phones was that they could be used
to call people overseas to ask them to send money. They were perfect for high-frequency
low-volume transactions, which were likely to become more important to the region.
There was a correlation between mobile phone accessibility and GDP growth in Africa so, if
the same worked in the Pacific, it could potentially boost GDP by slashing costs for recipient
households. It would almost certainly boost the level of remittances too, as it was known that
people were willing to send more when they knew that that money was being used
effectively. John Connell described the phone as becoming a ‘mobile wallet’.
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The diaspora
Caribbean research
The diaspora was a key driver of the Caribbean economy and, given the global financial crisis,
one strategy for Caribbean economies was to deepen relations with the diasporic communities
and economy.
This could include investment and diversification across trade and services.
Jessica Jones’ diasporic tourism study paired global cities with Caribbean countries like
London with Jamaica, and New York with the Dominican Republic. This research was being
published in the Canadian Foreign Policy Journal and was part of a full-length documentary.
Diasporic tourism
Significant numbers of total tourist arrivals in Caribbean countries were from the diaspora.
Diasporic tourism was generating new forms of entrepreneurship and investment in either
home countries or countries of origin.
This research notwithstanding, however, diasporic
tourism was relatively under-theorised and undervalued. There was an urgent need to target
it strategically, especially when the possibility was that links of identity and the desire for
migrants to come back home was weakening.
Brain circulation
Labour mobility was found to be an integral part of the business strategies of global and
regional firms working in the Caribbean. However, there were several infrastructural deficits,
such as limited financial and other resources to support collaborative work, and a lack of an
institutional model for diasporic engagement in science and technology. There was scope to
deepen engagement via telecommunications, including through home entrepreneurship,
especially in next-generation products and particularly for the creative industries.
Repatriating knowledge
The term ‘repatriation’ suggested that the knowledge of migrants living abroad actually
belonged to their small island homes, but had been shipped elsewhere. Pacific islanders had
migrated to diverse areas, where they had acquired different skills and created imaginative
products. Few of these benefits went back to the islands. Steven Ratuva’s paper suggested
around 10 such methods that would assist this repatriation process.
Extending home markets
Marielle Goto perceived diasporic tourism as a means to extend existing markets. Migrants
living in Paris, for example, wanted to eat the food of home, which the French would consider
ethnic. These items might be provided to the migrants by another diasporic community and
so interconnections would be formed, extending the market to the country of origin, which
might not necessarily be that migrant’s home country.
There were crossovers of culture,
cuisine and customs, which were avenues that could be explored, but there was not enough
information about this at the moment.
Nostalgic goods were definitely a product of tourism, and diasporic tourism in particular. On
the question of who was supplying them, Caribbean initiative and entrepreneurship had often
been able to manifest itself with or without government intervention.
Businesses would
spring up organically to take care of those needs. All policy could do was to make that easier.
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Creative arts
Steven Ratuva backed Godfrey Baldacchino’s call for more attention to be paid to the creative
arts.
The diasporic community was a route to globalising many traditional art forms; the
question remained how to send that money home.
The Pacific had some successful rugby
players, who went all over the world and provided sources of remittance back to the islands.
Diasporic investment
The current account balances of all Caribbean countries, including Trinidad and Tobago, were
in deficit. The migration of nurses had been discussed as a viable option, but the reality was
that the diaspora could be a significant contributor to investment at a time when foreign
direct investment (FDI) and overseas development assistance were in decline.
Case studies
American Samoa and Samoa
John Connell explained that ethnic Samoans were divided crudely into the independent state
of Samoa to the west, and the US territory of American Samoa to the east.
American
Samoa’s productive economy was based on fish canneries, but these had closed a couple of
years previously. People had started going back to Samoa, and remittances from American
Samoa had absolutely collapsed, whereas they were being sustained in Samoa.
Jamaican nurses
It had been established that the Caribbean experienced one of the highest levels of skill
among trained nurses employed outside the region. A 2009 World Bank study had described
this situation as being ‘without parallel’ elsewhere in the world. In only four years, around
1,800 nurses had migrated from the Caribbean, many of them from Jamaica.
highly skilled nurses were in greater demand.
The more
This had consequences on the quality of
healthcare available to the population.
The reasons for their migration included ‘push’ and ‘pull’ factors. Nurses were being pushed
out of the country by the poor physical infrastructure, a lack of funds to replace outdated
technology, insufficient supplies, limited opportunities for professional development and high
levels of physical insecurity and crime.
They were being pulled out by the higher pay and
insatiable need on offer in many developed countries.
The US and UK had created high-profile campaigns to attract Jamaican nurses in the
mid-2000s. The Jamaican Government’s response had been to advocate a deliberate policy to
train health professionals, particularly nurses, for export. Their principal rationale was that
they could not stop people from leaving, but they needed domestic nurses too, so this
additional training was put in place to cope with the excess demand. The Government was
effectively funding the education and departure of its human capital.
Since then, it had
advocated a formal partnership between itself, the US Government, universities and training
institutions to increase significantly the pool of skilled professionals from which other
countries could draw. Perhaps it should be questioning this policy and its value to taxpayers.
Jamaican education
Jamaica’s education system was haemorrhaging skilled professionals.
Between 2000 and
2003, 2,000 teachers had migrated from areas of great demand. Inequity was rife in access
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Meeting of Experts on Growth and Development
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to and quality of education, particularly at the secondary level, and there were gender
problems with males leaving the system earlier.
Social workers
The University of the West Indies was training social workers only for many of them to be
recruited by the UK. They left their countries to work with Caribbean migrant families and
address some of the problems arising from migration, but Jamaica was facing similar
problems itself as parents were leaving their children behind. The term ‘barrel children’ had
developed to describe children devoid of nurturing. The country had to hold on to the social
workers it trained in order to help resolve these very real problems.
Philippines
The model used in the Philippines closely resembled Jamaica’s.
A World Bank study had
argued that there was a sufficient pool of students, because only one of every six qualified
people applying to a nursing school was accepted.
Kiribati
Kiribati was used as an example of a strategic approach to international migration.
Throughout history, its islanders had been migrating permanently, but also in a circular way.
Moreover, they had been exploiting available opportunities quite successfully. The number of
Kiribati citizens, students and workers in the New Zealand economy had effectively doubled
over the course of five or six years.
This was partly in response to the challenges of the
international economy and changes to SLR. Kiribati was one of the SIDS that would be most
seriously impacted by global warming.
Kiribati-Australian Nursing Initiative
The goal of this initiative was to train nurses in Australia. The good ones would remain and
send back lots of remittances, while the others would return to Kiribati to provide nursing
services. Besides nurses, however, this kind of model risked Kiribati losing lab technicians,
x-ray specialists and other trained practitioners.
Such fears were heightened in countries
with small populations.
Tonga and Samoa
Since 2008, Tonga’s remittances had fallen by up to 20%, whereas Samoa’s had stayed
relatively stable. The difference could be explained by the source of those remittances. In
Tonga, they mostly came from the US, whereas in Samoa most remittances came from
New Zealand and Australia, where the dole was supporting unemployed people. In addition,
the tsunami in Samoa had killed 180 people, yet significantly boosted remittance flow.
Digicel in the Pacific
Some people were saying that being able to send remittances by mobile phone was likely to
increase money laundering, but John Connell doubted this. People in Papua New Guinea were
already using text messages to gamble. Digicel was trying to earn more customers; it would
be interesting to see Western Union’s response to their new advertising campaigns.
Competition was good for keeping transaction costs low in this business.
Within a year in
Tonga, Digicel had put 35 agents in place outside cities, showing they were following the
African model and were able to reach many more people.
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Meeting of Experts on Growth and Development
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Practical suggestions
Return migration
Policies for return migration needed to be focused more on keeping people at home than
attracting them back.
We should love the places where we live, not leave them.
Staying
should be seen as a human right and a viable choice, just as much as leaving was.
Godfrey Baldacchino strongly supported these aspirations, and Patsy Lewis commented on the
imbalance of skilled workers in the Caribbean. Well educated individuals who chose to remain
were likely to be poorly paid and highly taxed.
If they were treated with greater value at
home they might be discouraged from migrating.
The audience was reminded that health was listed as a basic need by the MDGs. There was
little return migration among health workers, and those that did go back tended not to work
in the health sector but would set up small businesses instead.
The issue of how to
reintegrate people back into these countries also needed to be considered before simply
encouraging their return.
Brain circulation
The Barbados Programme of Action was facilitating brain circulation. It employed a specific
modality called the Technical Assistance Programme that encompassed actions to harness the
power of diasporic strategic investments and facilitate brain circulation. Emphasis might be
placed on putting those mechanisms into operation in other countries by institutionalising the
Technical Assistance Programme.
Foreign-funded training
Caribbean nurses were likely to continue to show a high propensity to migrate, so a strategy
was needed that would stabilise domestic supply but continue to use the foreign market to
vent any surplus. One proposal was for foreign universities or their counterparts to establish
a base in the region that would invest in and train nurses. The problem of countries depleting
their own resources through spending on training would thus be minimised.
Demographic issues
Another suggestion was to restrict nursing training to people without children, and thus
reduce some of the social imbalances that were occurring when these people left.
Commercial cooperation
There was potential to further develop the industries that outsourced and insourced economic
migrants, and to advocate increasing South-South cooperation, development and assistance.
Compensation
The Commonwealth Secretariat and some of the Caribbean island countries had developed a
charter on the migration of teachers and nurses. Perhaps it should include arrangements for
countries that were accepting migrant personnel to pay compensation.
Diasporic tourism
Innovations in policy could propel this industry. One innovation might be to harness diasporic
tourism’s potential through the stimulation of entrepreneurial opportunities.
A very clear
statement of interest was also required. Niche products were already being introduced into
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Meeting of Experts on Growth and Development
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larger Western markets simply to meet diasporic needs, but there was a possible role for
policymakers in making them more mainstream.
Export initiatives
There were two paths recommended for export-oriented initiatives. One was the authenticity
path, where effective branding connected the buyer to the geography of the place, therefore
making the product less likely to be subject to competition. It needed to be something that
spoke to that culture, history or diaspora. Another path sought to combine elements of the
home country with the migrant destination as an interesting melange. Both the authentic and
the hybrid offered commercial opportunities.
Diasporic savings
Some islands in the Caribbean were capturing savings from the diaspora internally by offering
migrants higher interest rates on in-country savings. An increasing number of migrants were
now saving in their home countries rather than the US.
Remittances investment
Kenrick Hunte recommended that the next phase of development should be focused on the
more systematic investment of remittances.
By leveraging diasporic contributions, and
working with donor funds and other agencies, systems could be devised to make useful links.
There were definitely opportunities for collaboration between migrants, governments and
donor agencies to improve business, stimulate investment and try to capture more of the
remittances beyond spending on consumption and into areas such as infrastructure
improvement.
Investment of remittance funds would create better trained people, raise employment and
open the domestic markets to exports.
There were potentially large ethnic markets in
diasporic countries. Ways had to be found to link them to niche markets or products being
made at home and exported in a systematic way. This would create employment and provide
a new opportunity for investment in the export sector, but some work was needed in this
area.
Migrants were also returning home, as either retirees or tourists, who tended to be
richer than the people who had stayed.
Another consideration was that people migrating, especially from the Caribbean, were finding
themselves and their children being culturally integrated into Western society.
The US
Government had started a new diaspora policy seeking to encourage its immigrants to invest
in the Caribbean. It might be useful to find out what mechanisms they were using.
Protective investments
There was also a need for protective investments. In the Pacific island countries, banks were
foreign-owned and concentrated in urban areas with none on the outer islands.
undertaken some initiatives to send mobile banks into rural areas.
Fiji had
Unless surplus savings
went into banking reserves and hence into loans to businesses, it was unlikely that
remittances would lead to more investment.
Banks could also be persuaded, with some
concessions, to give higher interest rates on deposits arising out of remittances. Some South
Asian countries had been doing this already.
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Meeting of Experts on Growth and Development
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Institutional capacity
Increased institutional capacity was needed to help deal with some of these issues.
The
World Bank’s Doing Business report made some suggestions for ways to change investment
opportunities. These included methods for dealing with contract renegotiations and protecting
businesses.
business
It also employed a set of indicators to rank those countries that were doing
well.
The
top 10
included
some
Commonwealth
countries
–
Singapore,
New Zealand, Canada, Australia and Mauritius – but so did the bottom group – Nigeria,
Lesotho, Sierra Leone, Gambia and Cameroon.
There must be ways to bridge that gap.
Some concerns might be addressed through training, and the exchange of ideas at events like
this.
Kenrick Hunte strongly advocated using opportunities within the Commonwealth to
share knowledge so that those at the lower end of the scale could improve their business
processes.
Government remittance policy
Remittances were of course going to the private sector, but they still needed government
policy formation and support behind them.
The private sector was not the lone key to
development. Countries still needed roads, a health service and all of those kinds of things.
Research suggestions
Mapping the diaspora
More research into the focuses of countries’ skills should be developed in order to form local
skills banks.
More research was also required on who was leaving and how societies were
being affected by these departures. Diasporic communities could be mapped alongside their
resources and countries of origin. This information could come from surveys, through social
media or by building partnerships between governments and the diaspora.
There was an
assumption that only highly skilled people left, but the problem was perhaps far more
extensive. The quality of house builders in Jamaica was very low; plumbers and carpenters
were in short supply. It was necessary to examine what was underlying Jamaica’s low levels
of productivity and how it connected to high levels of migration.
Demographic issues
You could not examine migration without looking at gender, children and how they were being
affected, including by social challenges like crime. A discussion on migration was therefore
inseparable from one on the global political economy, how it structured states and what the
options were. What some most wanted was research on what migration policies existed in
small states and which were working best.
Business migration
Anthony Birchwood thought it would be interesting to discover how many migrants had taken
their businesses with them or would contribute to the operation of businesses back in their
home countries.
The impact of this could go beyond consumption; it could create
employment. Such a project could be extended to examine the contributions of those who
had returned home and helped to rebuild.
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Meeting of Experts on Growth and Development
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Seasonal migration
Another research recommendation was on seasonal labour migration in the fruit-picking
industry, and the impact on Pacific island economies of workers travelling to Australia and
New Zealand.
Reverse migration
These presentations were based on the classical notion of the flow from the periphery to the
metropole.
Perhaps more could be done to study the reverse.
In Nauru and the
Solomon Islands, for instance, most aid professionals were paid for by AusAID with a lot of
money going back to Australia.
This same dynamic was causing a lot of controversy in
Papua New Guinea, so it ought to be included as part of any ongoing research.
Local governance and community development
Two further suggestions for ongoing research were the contribution to or negative effects of
returned migrants, either voluntary or forced, on local governance and community
development.
Mobile banking and telephony
A strategic analysis was needed into methods to enhance mobile banking in the Caribbean
and telecoms-enhanced social entrepreneurship within its diaspora.
Sona Varma supported
this as an area for further research, in perhaps answering the question of whether mobile
phones were going to transform remittances and their impact by reducing transaction costs.
Samoa had already seen relative success with this method. New research could also look at
how mobile phones could increase financial inclusion, not only with remittances but also
through savings or payment products.
Brain circulation
Brain circulation was missing a strategy to force the recruitment of skilled Caribbean nationals
in the diaspora in order to mobilise their skills and strengthen capacity. Godfrey Baldacchino
had been discussing brain circulation issues for several years, and the fruits of his research
were about to ripen. A specific approach to research could be to demonstrate cases where
small states had successfully retained or returned trained professionals, sometimes by using
government incentives.
Knowledge economy
Steven Ratuva queried what could be done to repatriate knowledge from the Pacific island
diaspora. There was a need for a thorough study of the potential for a diasporic knowledge
economy, based on what already existed. This analysis of the knowledge economy could be
extended to include access to informal or indigenous knowledge.
Knowledge exchange
The mechanisms migrants were using to transfer skills capital, knowledge and ways to build
capacity in their home countries should be examined. They sometimes involved activities in
culture, sport, education, health, disaster relief, restorative work or funds to support social
safety nets, children, grandparents and others.
Understanding how they were organised
required collaboration between migrants, donors and policymakers.
There was room for
Commonwealth countries to learn from each other and expand their shared knowledge. Its
record of cooperation and consensus-building, plus its existing expertise and success, made
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Meeting of Experts on Growth and Development
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the Commonwealth uniquely placed to address these issues. This could be a complex issue
and one worth pushing, as sometimes simply having the knowledge was not enough to make
transformative impacts in a country.
Migrant markets
Research was needed that addressed migrant markets and opportunities for backward
linkages to production, investment and employment.
Effective public institutions could
provide goods and services using procedures that would ensure equal access, fairness, equity,
accountability and efficiency, if research showed how this was best done. Here Sona Varma
requested further research into what would make migrants send more money. Were skilled
migrants the only target market for this? If so, how could governments encourage them to
raise the volume of their remittances?
Partnerships
Research could also look into partnerships between different institutions, academic, economic,
etc, asking how to generate the diaspora and reproduce the knowledge economy for
development purposes. It would include an analysis of what policies were already in place in
small island states to link the knowledge economy to development.
Diasporic tourism
Research into diasporic tourism should also be continued by outlining a strategic plan,
developing a clear statement of intent, and prioritising marketing and product development.
Naren Prasad and Jessica Jones agreed that this was an under-theorised area of research.
Diasporic entrepreneurship
There were also endorsements
for some research to be carried
out on diasporic
entrepreneurship. Jennifer Jones suggested it should be focused on four areas. The first was
a strategic analysis of methods to enhance mobile banking and telephony in the Caribbean,
and social entrepreneurship between these countries and their diaspora. The second would
be ways to facilitate brain circulation by fostering the recruitment of skilled Caribbean
nationals in the diaspora on short-to-medium-term employment contracts.
Third would be
sports tourism; and the fourth area of focus suggested was medical tourism. The idea behind
these investigations would be to formulate a strategic plan on diasporic tourism that produced
a clear statement of intent on the diaspora, strategy, marketing, product development and
the potential to stimulate entrepreneurial opportunities.
Using the broad heading of
‘Diasporic entrepreneurship’ made the link to migration clear.
Diasporic investment
Investigations should aim to ascertain how to harness the power of the diaspora as strategic
investors. This could be in agriculture, such as through installing the necessary companies to
export food products; or in wholesale tourism, with tour operators placed in key capitals.
Such approaches could assist in the democratisation of the value chain.
Several research
articles had argued for more effective use of formal channels of diasporic investment, yet the
people of Samoa and Tonga wanted to avoid it.
Future of remittances
More research money and more data were needed to find out about the likely actions of the
second generation.
Accompanying work was also needed on return migration, social
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Meeting of Experts on Growth and Development
remittances and skills migration.
17-18 November 2011
John Connell was able to offer the services of an
enthusiastic PhD student should funding be made available. Another consideration was that
entire families were often able to join the original migrant through visa systems.
These
departures might also reduce the level of future remittance contributions. Some were finding
that, if migrants had savings and investments in the home country, they were more likely to
maintain an economic connection. It would be interesting to look at this more closely.
Practical Ways to Build Resilience
Relevant presentations
•
Lino Briguglio summarised and updated a 2006 paper on economic vulnerability and
resilience to include the effects of the global financial crisis.
•
Chris Said introduced some of the constraints that small states faced when competing
in international markets.
•
Gérard Adonis highlighted a number of issues pertinent to growth, resilience and
macroeconomic stability in small states from a recent paper prepared for the
Commonwealth.
•
Godfrey Baldacchino’s presentation on strategic flexibility argued that intersectoral
migration was a route to economic resilience.
•
Terra Sprague presented findings on the history of and implications for education in
small states.
•
Mahendra Reddy provided an overview of Pacific island economic growth over the last
two decades, linking it to a lack of competitiveness and competition policy.
•
Steven Ratuva explored ways to enhance the knowledge economy for development in
Pacific island states.
•
Donna Lee analysed how small states participated in economic negotiations within
multilateral organisations.
Background
History
In 1985, there had been a conference in Malta where many participants had asked what the
worry about small states was. Lino Briguglio remembered thinking to himself that, although
Malta had been doing well, it was still fragile and could easily lose everything. That was the
origin of the idea of vulnerability.
However, its measures were abstract, so proxies were
needed to capture trends. Indicators might not be 100% accurate, but they reflected general
tendencies. They showed that when a small state did badly, it did really badly. This was the
origin of the idea of resilience.
Flexibility
The established literature of resilience implicitly assumed that a thing – an economy, person,
household or organisation – could be expected to maintain itself in the face of change or to
rebound in the same way as before a shock or catastrophe.
Combined with this
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Meeting of Experts on Growth and Development
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understanding, resilience could also mean being flexible, and being available to adapt to an
opportunity that could restore dynamism and vibrancy in an economy, with an openness to
future opportunities.
Growth
Resilience-building was thus promoted as a set of policy responses that addressed inherent
vulnerabilities. It was argued that resilience correlated with growth, yet the volatility of that
growth remained a significant concern in small states.
Development paradigm
The IMF Managing Director had recently commented on the need to build financial and
monetary systems that not only dealt with any shocks that emerged, but also reduced the
possibility of such shocks from taking place. Winston Dookeran asked whether small states
were sufficiently protected by international shock absorbers.
credit lines or other financial facilities available?
For instance, did they have
A development paradigm had to help
prepare them for any future shocks they were likely to face.
Policy responses
Most countries reacted to shocks emanating from the external environment through a
significant adjustment to their public administration and management systems. Such shocks
included natural disasters and self-inflicted vulnerabilities. At times emergency policies were
employed to solve deep-seated social problems.
Many reforms could be decided at the
organisational, ministerial or departmental level, unaccompanied by the wider systemic
impacts required to move countries towards transformation.
Definition
Lino Briguglio had been collaborating with the Commonwealth Secretariat for a long time on
the topic of vulnerability. They defined it as exposure to shocks, which resulted from three
main factors: openness to trade and hence to factors beyond the small country’s control;
export concentration; and dependence on strategic imports, which were mostly fuel and food.
Vulnerabilities
Common characteristics
The group was urged to continue reminding itself of the particular challenges that small states
faced and how they differed from large industrialised countries.
•
Many
small
states,
particularly
SIDS,
had
limited
environmental possibilities and few natural resources.
physical
space,
restricted
This necessitated some
dependence on external sources of aid and funding.
•
They were often geographically distant from sources of raw materials and export
markets, which increased import costs.
•
Small states had small populations, and therefore few human resources and contracted
domestic markets.
•
The Caribbean, Indian Ocean and Pacific islands were vulnerable to natural hazards
including tsunamis, hurricanes, volcanoes and earthquakes.
The threats posed by
global climate change were becoming more apparent.
•
Many had to import food and water from elsewhere, and so were dependent on trade.
32
Meeting of Experts on Growth and Development
•
17-18 November 2011
Limitations of economic scale and critical mass also beset small states. Few market
possibilities led to economic specialisation, which created additional vulnerabilities.
•
Another peculiarity of small states was that their cabinet ministers often had to hold
several different portfolios.
Vulnerability index
There were differences in vulnerability, so Lino Briguglio had standardised the variables to
calculate a vulnerability index. This had led him to the overall conclusion that small states in
general tended to be more vulnerable than larger ones.
The least vulnerable states also
depended less on external trade.
Economic size
Small states invariably had to reconcile themselves to being open economies and, as a result,
not as easy to plan as larger states could be.
They therefore needed greater flexibility in
considering their predicament.
The financial crisis
Many small developing states were found to have been adversely affected in 2009 compared
to other years. Caribbean countries had been the worst hit. They had an average decline in
GDP of 6.8% compared to the first years of the 2000s. It seemed that some were recovering
quite well.
Although changes were a bit slower in the Pacific, there was an indication that
they would be able to recover. There were additional concerns that successive consequences
of the crisis were stripping countries of their savings, leaving them in a very difficult situation.
There was a request made to retain the impact of the financial crisis on small states as part of
continuing discussions. This group should be examining the effectiveness of policies created
in response to that crisis.
Exports
Small states had small markets, and therefore had to seek export opportunities, which
required them to compete. It was paradoxical that, although small sizes forced small states
to resort to international trade, their small domestic markets limited their ability to compete,
because of the high costs of doing business.
Financial regulations
Tourism was the economic mainstay of many small states, followed by offshore financial
services.
In an attempt to diversify into the latter, many SIDS had been met by major
setbacks in the form of the stringent financial regulations imposed by OECD countries. In the
week of this meeting, the Seychelles had been sanctioned by OECD for failing to instate
certain regulations that even some European countries did not have in place. Gérard Adonis
argued that international organisations, such as the OECD and WTO, must treat small states
fairly. Imposing stringent financial regulations on a small country like the Seychelles, which
depended on offshore financial services, would set them back.
Market openness
The general finding was that small states were more open than larger ones.
This was
explained by their local markets being smaller and their dependence on importing natural
resources. They also tended to be more concentrated, depending on a few export items only,
as well as food and fuel imports.
Open markets and movement away from communal
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Meeting of Experts on Growth and Development
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systems were seen as undesirable by some social scientists, who were against the imperial
behaviour of advanced economies and the perceived disadvantages that small islands could
suffer from globalisation.
A communal system with strong loyalties presented some
difficulties for the establishment of a market economy, because markets depended heavily
upon transactions between parties who did not know each other. Wealth acquisition in Pacific
island countries largely came from government-created monopoly positions, for example by
restricting trade investment or gaining favourable protection for certain imported products.
Existing private sector interests were generally antagonistic towards opening the economy
and increasing competition.
Self-inflicted problems
Rose Azzopardi drew attention to the phrase ‘self-inflicted’, used by Philip Osei to link public
sector reforms to states’ response to exogenous and endogenous shocks.
This brought to
mind that the wrong policy decisions could themselves cause crises that might otherwise have
been mitigated.
Some public sector reforms might have negated social development gains
made earlier.
External shocks
The evidence showed that SIDS were more vulnerable to external shocks than less-developed
countries (LDCs) whose economic growth was stronger. The three major shocks of the 2000s
had more severely been felt by SIDS compared to LDCs. Foreign aid donors should not only
use GDP per capita as an indicator, because this was often higher in SIDS than in LDCs, but
this did not imply that they were more resilient.
This could be detrimental to smaller
economies.
The consequences of external shocks
2001 and 2009, the years of 9/11 and the global financial crisis, had seen record negative
GDP growth in all SIDS regions.
The 2000 recession had been particularly harsh for the
Pacific, African and Asian regions, while the 2009 recession had taken its toll on the Caribbean
and Africa. The African region was more prone to external shock than others. It appeared
that SIDS were able to recover from external shocks quickly, yet their growth averages would
remain quite volatile. Analysing the trend in average real GDP revealed some inconsistency in
growth rates, in particular in Asia and the Pacific. From a peak of 15% in 2003, the average
growth rate had fallen below 5% in 2006 for the Asian region, and by a similar level in the
Pacific.
These sharp fluctuations had been a consequence of external shocks, notably the
financial crisis in 2009, the Indian Ocean tsunami in 2004, and SARS and bird flu from 2003
to 2006.
Natural disasters
Second-order impacts arose from natural disasters.
These included the exacerbation of
economic vulnerability as, in the post-disaster period, countries would have either to borrow
money or reallocate resources. Both methods were unsustainable as part of any long-term
development trajectory, and contributed towards increasing social inequity.
A 2009 study by the Economic Commission for Latin America and the Caribbean (ECLAC) had
showed the socioeconomic impact of disasters on Caribbean economies. There had been 165
natural hazards affecting Caribbean countries between 1990 and 2008.
Haiti, the
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Dominican Republic and Jamaica had been the countries most affected. Damage costs had
been around $136 billion between 1990 and 2008.
Piracy
A recent phenomenon that had attracted world attention was the spike in pirates’ attacks off
the coast of Somalia. This was affecting some SIDS in the Indian Ocean. Modern piracy was
posing a real threat to global maritime safety and disrupting shipping patterns. Its impact
had been felt in the tourism and fisheries sectors in the Seychelles, for example. Its overall
cost to the economy in 2010 had been estimated at around $17 million. Although the impact
of piracy was confined to this region, the threat it posed was enormous.
Public sector monopolies
Following independence from colonial powers, new national governments in Pacific island
countries had taken on productive activities, such as utilities and major infrastructure. It was
the normal tendency for them to want to provide telecommunications, water, roads,
transportation, etc. Public sector monopolies had therefore been created. This approach to
development, with government playing a major role in productive activities and using trade
barriers to protect and promote import substitution, had been endemic in the late 1960s and
1970s.
Unlike other developing countries, however, there was a reluctance to move away
from this paradigm in the Pacific. The consequence was a lack of support for private markets,
anti-competitive behaviour and unfair trading practices.
Private sector monopolies
The invisible hand of private sector monopolies also made it difficult to promote competition.
This could be seen in the stranglehold these monopolies had on information technologies.
Broadband connections were not available in remote islands, and the cost of telephones was
very high. Perhaps governments should take over, as Singapore had long ago, in order to
promote the knowledge economy.
Competition challenges
In the energy sector, for example, small states’ sustainability challenges might prevent them
from operating in a competitive market. Lino Briguglio confirmed that there were obstacles
and barriers in this particular sector, such as vested interests, which impeded proper use of
resources.
For example, a market-based mechanism to promote sustainable energy
production was immaterial when there was only one energy provider.
Economic resilience
Definition
Lino Briguglio and the Commonwealth Secretariat had developed a four-year programme
studying the issue of resilience. It was defined as the ability to rise again after a shock. This
study identified four variables thought to enable a country to withstand shocks:
•
Macroeconomic stability and room to manoeuvre;
•
Microeconomic market efficiency and being able to respond to scarcity;
•
Good governance creating the infrastructure, foundation and rules for markets;
•
Social development to avoid any unrest.
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Meeting of Experts on Growth and Development
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There was no indication that small states had better macroeconomic stability, so size did not
matter here.
The general tendency was for small states to have more efficient markets.
They were also found to be better governed, and likewise had higher social development
indicators.
Growth with resilience
Growth with resilience was one of the pillars of the G20 and an area where the
Commonwealth was well placed to offer advocacy. The relationship between the two was that
the fastest-growing small states had the highest resilience scores.
policy-grounded.
Resilience scores were
Countries were not born resilient, but made themselves such through
appropriate policy frameworks.
Sectoral diversification
The term ‘occupational multiplicity’ was developed by Lambros Comitas in relation to Jamaica
in the 1960s. Others referred to ‘flexible specialisation’, but it entailed the same approach of
developing an ability to connect with different sectors of the economy at the same time as
retaining a specialism. A significant point for governments to consider was how to diversify
SIDS to become more resilient to economic shocks. Data showed that the best-performing
Caribbean countries were the most economically diversified, which tended to be on the South
American coast.
Sectoral involvement
The core activities of a small state, including its public sector and subsistence economy, had
become increasingly important in times of crisis. Various other segments were involved, such
as those traditionally associated with low-income developing economies, like aid, remittances
and primary exports.
These had been depended on in the past, but might not be in an
increasingly liberalised environment. More optimistic sectors like banking and tourism could
be used to exploit specific geographies, locations and time zones.
Exports
A lucky few could export oil and gas, but this did not apply to many small states. There were
other niche exports. Godfrey Baldacchino increasingly believed that the green economy was
the best solution at this point in time, but the window for change might only be open for as
short as a year.
Trade preferences
The trade preferences afforded to many SIDS were important to sustaining their economic
development. However, many had recently become victims after these same preferences had
been removed.
Some of the trade preferences established were creating a spiral of other
concerns, damaging the ability of small states to maintain social investment, social capital
and safety nets. They made more push factors for migration to add to the significant debt
challenges.
Dominica had argued for preferential treatment from the Europeans in exporting its bananas
and sugar, using the colonisers’ supposed moral imperative to take care of these former
colonies. However, after the start of negotiations, it had become apparent that there was no
such connection and Dominica had later given up this request.
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Meeting of Experts on Growth and Development
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Migration
Patsy Lewis challenged the tendency to describe small states as lacking capacity and thus
make them the recipients of capacity building, when perversely they were engaged in
strengthening the capacity of developed countries through economic migration. This external
capacity building was often presented as an opportunity for potential migrants, as if they were
recipients of aid when they were actually engaged in a major project of giving.
IT industry
Godfrey Baldacchino requested a discussion about the role that new technologies in IT and
the arts were having on competitiveness and the dynamics of the knowledge economy. These
industries were not necessarily scale- or even place-dependent; therefore, the assumed
chronic vulnerabilities of small states were not necessarily present. An effective IT company
could be run from almost anywhere, for example.
Innovation and creativity went together
very well. These topics merited more discussion, particularly in terms of their contribution to
entrepreneurship. Mahendra Reddy voiced his agreement, as full information was critical to a
competitive economy, and IT had caused a major revolution by allowing everybody to access
information. However, IT penetration was still quite far behind in the Pacific. Other factors,
such as electricity and the price of computers, were underpinning this.
Where penetration
was better, in countries like Fiji, it had provided remarkable assistance. Steven Ratuva also
agreed that part of the solution to some of the problems faced by small island states could be
found in the IT industry.
Gordon Cordina was doubtful about equating IT with the knowledge economy. He depicted it
more as a tool to reduce transport costs and services between countries, but the point on
creativity was well taken. Small islands should be seen as places to perform activities that
were not being performed optimally in other areas of the world. Creativity, innovation, art
and culture could therefore find good expression as part of islands’ development.
Soundness of banks
Lino Briguglio had developed his 2006 study to include an assessment of the soundness of
banks, juxtaposed against market efficiency.
For example, the Chinese market had not
functioned that well, but their banks were sounder than in the US, where the market worked
better.
This variable was introduced to limit a high reliance on these liberal ideas.
Asked
some questions about how this index was constructed, Lino Briguglio referred participants to
the competitiveness indicator, which relied on the views of experts.
This was the best
indicator available. These experts, for example, had ranked the Irish banking system as one
of the worst. The exposure of this view alone had had consequences for Ireland, and similarly
for the US. In Asia, where people saved more, banks had not been as adventurous.
Saving
One of the comments made during the discussion was that countries had to learn from their
experiences.
During boom periods, instead of saving resources for a later bust, some
countries had spent them on experiments. During the 1990s, Papua New Guinea had been a
mineral-exporting country with surpluses.
Its civil servants had rewarded themselves with
bonuses; and ministers, with perks. When the bust had come, they had entered a decade of
absolute recession.
This experience showed that mineral-dependent countries had to save
any resources available.
37
Meeting of Experts on Growth and Development
17-18 November 2011
Competitiveness and competition
Chris Said stressed how he considered economic competitiveness a major ingredient for
economic success.
Lino Briguglio differentiated that the term ‘competition’ was generally
used to describe domestic competition, while ‘competitiveness’ referred to exports or
international competition.
scale.
Competitiveness was an important way to move up the income
Although Mauritius was top of the Mo Ibrahim Index, it was held back in the world
Competitive Index because of a lack of efficiency in government bureaucracy and corruption.
Competition and competitiveness were particularly important to small states in the Pacific,
because of their particular vulnerability to shocks and handicaps. History showed that Pacific
island countries were able to achieve macroeconomic stability relatively quickly following a
fiscal crisis, but the kinds of microeconomic reforms urged by international finance and
bilateral organisations were proving difficult to implement.
Competition in agriculture
Certain institutions could affect the ability of a government to adopt competition policies. The
most important institution in agriculture was to allow land property rights, as opposed to
informal access. In almost all Pacific island economies, land outside urban areas was mostly
held under customary ownership.
A well-defined land tenure system would provide the
foundation for competition in the agricultural sector.
There was a lack of interest, in Pacific island countries, to establish clear property rights.
Impartiality in enforcing contracts was evident from the financial corporation database. The
result was that the costs of doing business had increased for most of these countries, when
transaction costs to register property and settle contracts were extremely high. A culture of
claiming compensation had developed in many Melanesian countries. Doubts could therefore
be raised about the enforceability of certain land contracts.
In many cases, governments
would not support contracts but allowed compensation claims to proceed. These disputes had
increased investment uncertainty. There was a clear link between poverty and the inability of
institutions to secure property rights and open markets.
Multiple economic waves
Riding multiple economic waves was something people were doing naturally as a canny
response to environmental situations, but there were ways this could be enhanced, such as:
•
Educating entrepreneurs;
•
Promoting cultures where there would be no shame in business failure;
•
Deploying intrapreneurship, which meant using the public sector for private ends;
•
Developing the role of the informal economy in small states literature.
Social and political resilience
Accepting vulnerabilities
Chris Said believed that the reason why some small states were performing better than
others was that they had come to terms with their own constraints. Malta had never been
complacent in the face of its inherent vulnerabilities and had, over time, adopted policies to
enhance its economic resilience. Lino Briguglio had argued likewise in his seminal paper on
economic vulnerability and resilience. He referred to this reality as the ‘Singapore paradox’,
38
Meeting of Experts on Growth and Development
17-18 November 2011
which singled out the improvement of competitiveness as a major enhancer of resilience.
This in turn required good governance, a stable macroeconomic environment and efficiently
working markets.
Governance
Resilience was policy-induced – you could do something about it – whereas vulnerability was
mostly inherent.
The worst cases were the small states that were vulnerable and badly
governed. Jamaica was on the verge of moving into this category. The ‘prodigal son’ group
comprised countries rich in natural resources, but not very well governed.
Some of the best-case examples, like Singapore, had specific governance structures that did
not match orthodox Western democracies.
Singapore had not scored highly for its
governance in Lino Briguglio’s indices, and the country was often considered to be too
paternalistic.
In recent times, an opposition party had started to emerge, so a democracy
might eventually be formed. In the economic and social fields, however, no small state could
beat Singapore. It had efficient markets, high Human Development Index (HDI) scores, good
facilities and a competition policy.
International diplomacy
It was possible to compensate for smallness within WTO negotiations largely because of the
consensus decision-making structures. You had to be in the room to object to a decision or
agreement.
Small states could use the weapons of the weak in the current climate of
development discourse, so this consensus decision-making had to remain. The alignment of
the DDA with the MDGs at the beginning of this century had allowed a discourse of
development to dominate. Jason Sharman had written on the ambiguity of dominant ideas
and principles such as development and free trade, which constituted regimes like the WTO.
They gave scope for weak actors to appropriate, subvert and reverse the interpretations of
dominant actors, thus heightening the moral sense of development, which small states could
leverage in international economic governance. Vince Henderson was unsure whether moral
arguments would succeed on their own.
Process impact
The process impact was very significant. Resistance could not be managed out of the WTO as
it could in other international organisations. Small states could no longer be ignored. The
WTO was more inclusive and transparent than its counterpart, the GATT, but a crisis was
clearly now emerging in global trade governance.
The DDA had been in negotiation for
10 years, and there was no possibility of a new deadline being met.
This has led to
institutional Darwinism, with nation states looking for alternatives to the WTO.
The WTO
could and was being ignored by major powers. Much of the deadlock over the DDA was due
to small and developing states asking others to implement what had been agreed.
Small
states must hold major states to account to their free trade commitments and development
promises.
Develop technical knowledge
Delegates to multilateral institutions had to learn how to ask why and to ask how, which could
be difficult during very technical and long-winded negotiations. Small African states had been
very shrewd at developing their technical knowledge and skill within the WTO.
They had
taken advantage of the UN Conference on Trade and Development (UNCTAD) and many other
39
Meeting of Experts on Growth and Development
17-18 November 2011
NGOs from Geneva, such as the Advisory Centre on WTO Law, which had been set up to help
small developing countries submit their cases to the Dispute Settlement Board. There were
many reasons why small and developing states were not using this system, however, one of
which was that a finding in favour only granted a right to retaliate through trade measures,
not a right to financial compensation. Small states must invest in deliberative capacity and
build the skill base to be able to recognise and negotiate their changing interests.
Focal point system
Rather than spreading their resources very thinly, small African states in Geneva had
coordinated to form a focal point system. Since one could object by sitting around the table
but could not if one was absent from the meeting, small African states had divided their
portfolios very cleverly.
Social development support
Despite their limited financial resources, SIDS would allocate a significant proportion of their
national budget to social expenditure. In view of their vulnerability, it was difficult for SIDS to
sustain this high investment in social development without continuous support from external
donors.
Social Protection Floor
Siva Palayathan observed that the best policies emerged out of crises. The US Social Security
Act had come from the Great Depression; British universal health coverage, from World War
II. The concept of small states building resilience through social protection had often been
repeated.
It was a way to generate growth, stop migration, alleviate poverty and provide
social services, and should be the priority for any social policy framework.
The Social
Protection Floor had been introduced as the minimum social services provision for every
country.
It contained four categories: basic healthcare, a child and family allowance,
assistance for the unemployed and poor, and a pension scheme for the elderly.
Education
The broad thrust of Terra Sprague’s study concerned whether education played a role in small
states’ response to major external shocks and challenges within environmental, economic,
cultural and political domains.
Climate change was particularly troubling for small island
states, as they faced threats to land and sea resources. Education was perceived to have a
central role to play, including through sustainable development.
The current education system in the Pacific islands suffered from a high drop-out rate;
tertiary education was limited; and research capabilities needed to be built. Wong Poh Poh
related how a universal education system had been instrumental to putting Singapore at the
forefront. Caribbean countries were a little higher than Pacific countries, but small EU states
were much higher still.
To build a knowledge economy, it was not enough to rely on the
diaspora or brain circulation; the initial step had to be improved primary and secondary
education.
Australia had been assisting many island countries by providing curriculum
materials and teacher training programmes, but many teachers trained in countries like Fiji
were then migrating elsewhere.
40
Meeting of Experts on Growth and Development
17-18 November 2011
The knowledge economy
The rise of the knowledge economy underpinned the strengthening of higher education, with
related implications for ICT and quality assurance.
The main message here was that
education was able to maximise the potential of human resources and would help develop a
highly skilled workforce.
coordination.
Small states already had a strong record of using ICT in regional
They could use these methods to increase businesses’ participation in the
knowledge economy. This was particularly relevant to geographically isolated states.
Knowledge reproduction
Steven Ratuva had been working on numerous research projects, including one on social
protection in the Pacific, responses to the triple financial crisis and a UNESCO project on
indigenous knowledge. His imagination had been captured by the way that, in response to
some of these crises, people had begun to remobilise and reproduce patterns of life they were
used to, which had been around for hundreds of years. These had taken the form of informal
social protection and knowledge mechanisms that could mitigate these major crises, where
people were beginning to reinvent and sustain knowledge of their social systems, past and
culture.
Measuring knowledge
In recent years, the World Bank had developed the Knowledge Assessment Methodology to
analyse the Knowledge Index (KI) and Knowledge Economic Index (KEI).
They were very
much based on formal factors connected to the economy, using pillars such as education,
human resources, innovations and ICT.
They were useful when trying to quantify the
knowledge economy, but failed to capture the dynamic social lives of these communities. The
informal knowledge economy also needed to be addressed through an enlarged paradigm that
incorporated additional areas.
Human development
The HDI consisted of data on life expectancy, education and per capita GNI, and was an
important indicator of a country’s capacity to develop its people. There were small states at
the bottom end of the HDI and others at the top. Slow HDI growth coupled with emigration
had repercussions on SIDS’ socioeconomic development.
As a result, they had to rely on
expatriate labour. Given their small size, and lack of capacity and capital, many SIDS found it
difficult to keep up with modernisation in different industries, such as agriculture, fisheries,
manufacturing and IT.
Without benefits of scale, it was difficult for them to compete at a
global level.
A trained workforce
In spite of their positive efforts, only a handful of SIDS were above the 0.8 threshold on the
HDI. Government spending on health and education was being undermined by international
migration.
A highly educated workforce was a key element in sustaining socioeconomic
development and adapting to changing technological demands.
For SIDS, this could bring
comparative advantages in high-value added services, such as IT and finance.
Research and partnerships
Locally grounded research had the potential to inform educational, social and economic policy
and practice. It was believed that this rooting in local context deserved increased attention,
and that national, regional and international partnerships would continue to bring success.
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Meeting of Experts on Growth and Development
17-18 November 2011
Commonwealth agencies had a strategic role to play to support small states to meet their
priorities.
Self-sufficiency
While small states must continue to seek external assistance to implement their development
strategies, they knew their own needs and priorities best. Most importantly, they had much
to contribute to international discourse and policy deliberations worldwide.
Case studies
African small states
A 2007 World Bank report on small states in Africa had suggested that, compared to other
situations, smallness was an advantage in Africa. It had made the following points: growth
rates were less volatile among small African states compared to large sub-Saharan countries;
there was a larger service and industry sector; there were higher levels of government
spending as a percentage of GDP; and there were smaller and more urbanised populations,
which posed less danger of ethnic fractionalisation. The advantage of smallness appeared to
be peculiar to African states.
International diplomacy and Doha
Donna Lee considered the WTO to be currently drifting inside a ‘lost ark’.
Development Agenda (DDA) negotiations had been stalled since 2008.
The Doha
There was a risk it
would fail to produce any results. Various explanations had been given, but Pascal Lamy had
agreed that a cotton agreement was essential for it to continue.
Donna Lee wanted to know more about the triggers for small-state activism within a WTO
setting, African small states in particular. Small developing states were largely absent from
GATT negotiations, despite having been very much at the forefront in some areas over the
past decade. Small states had high hopes; they thought that the DDA would deliver some
good results, but unfortunately it was dragging its feet. Nothing was happening and nobody
knew if it ever would. Pascal Lamy was now talking about reforming the WTO by stepping
back from the single undertaking in order to reach an early completion.
The Cotton Four
Donna Lee had recently become involved in studying the resurgence of African activism in the
WTO, focusing on the Cotton Four of Benin, Burkina Faso, Chad and Mali.
The cotton
negotiating committee of Benin had forced through a new process whereby, at every meeting,
certain states had to show how much agriculture and cotton they were subsidising and how
this had changed.
Making them accountable in this way had significantly assisted small
states’ power in the negotiations.
Singapore paradox
One of the most open countries was Singapore. It exported 200% of its GDP. That meant
that only a third of what it sold remained in the country, so it was highly dependent on
exports.
Lino Briguglio had tried to find the reason for Singapore’s success and also why
Malta was able to generate such a decent standard of living. Mauritius and Barbados were
other countries that lacked any natural resources and were exposed to shocks.
The
Singapore paradox might not be a paradox at all; the issue remained how this theoretically
weak country was managing to produce such high levels of GDP.
42
Meeting of Experts on Growth and Development
17-18 November 2011
Singaporean innovation
Singapore had often served as a model to help others make changes, and it could also help to
develop the knowledge economy.
Fiji had been trying to emulate either Malaysia or
Singapore to improve its civil service trading. Innovation was crucial. In fact, Singapore last
month had surpassed the US to become number one in global innovation.
It was very
important for small island states to learn from and replicate each other’s successes, and
maintain that circulation of knowledge.
High levels of resilience
The risk of being exposed to a shock depended on levels of vulnerability and resilience. Many
small states were both very vulnerable but also resilient, which mitigated this risk. Examples
included Singapore, Malta and Cyprus.
Caribbean social responses
Social policy responses in recent times were limited by countries’ heavy indebtedness, leaving
little room for local development. It was only through sheer luck that there were still some
forms of aid, as most of these countries should have stopped receiving it long ago. Active
labour market policies would extend skills training, retraining and activation to provide an
incentive for the unemployed to seek, obtain and retain jobs.
Pacific island macroeconomic analysis
Since independence in the 1960s and 1970s, most Pacific island economies had been
performing at levels below what were generally needed for improved welfare.
The
Cook Islands, Fiji, Kiribati, Samoa, Tonga and Tuvalu had all had positive per capita GDP
growth during this period; while this had on average been negative for the Marshall Islands,
Micronesia, Solomon Islands and Vanuatu.
In recent years, living conditions appeared to
have been worsening for many people in most of these countries.
Two decades ago, this poor economic performance was attributed to a lack of appropriate
macroeconomic policies.
This belief was the basis of reforms, the results of which were
mixed. Institutional economists said that the slow progress in growth for many developing
countries was largely due to their lack of appropriate institutions. This undermined attempts
for competition. Competitiveness was a means for firms to gain the advantages necessary to
survive in their market.
It was the degree to which a country could produce goods and
services that met the test of international markets, while simultaneously expanding the real
incomes of its own people.
Competition authorities in the Pacific islands
Of all the Pacific island countries, only Fiji and Papua New Guinea had a fully-fledged
competition authority, and therefore competition law and policy.
Some of the islands had
various consumer protection Acts to control the pricing of goods, but most lacked specific
legislation to promote competition, oversee mergers and acquisitions, and deal with anticompetitive behaviour.
In general, development assistance agencies had not recognised the lack of interest in open
markets, secure property rights and impartial enforcement of contracts; and were not giving
substantial attention to economic reform. While Pacific island economies had been growing,
in most cases the rate of growth had not been enough to exceed population growth and
43
Meeting of Experts on Growth and Development
increase per capita incomes.
17-18 November 2011
Unless Pacific island countries developed and adopted
competition policies, they would have great difficulty in advancing a competitive economy that
was capable of harnessing growth from a highly competitive changing global policy.
Competition policy must be enforced by an independent commission, which only two Pacific
island countries had. It was time for others to establish such independent authorities.
Economic and Finance Ministers in the region had recognised the absence of many political or
legislative frameworks for competition, and were prioritising this problem. Mahendra Reddy
had commented on the lack of these frameworks, but enforcement mechanisms had to be
built too. The problem in the Pacific region was insufficient capacity to enforce, which had to
be reflected in the structure of whatever law and policy captured those limitations.
Agriculture in the Pacific islands
The issue of land tenure was critical to these economies, and a key factor impeding
development of the agricultural sector.
Customary land tenure systems were a cause for
declining agricultural production in the Pacific islands. Per capita agriculture production for
seven Pacific island countries had been falling over the last four decades. Estimates of total
factor productivity for most of these countries were found to be negative or barely positive
over these past 42 years.
Pacific island knowledge economy
Of the 146 countries the World Bank’s knowledge economy frameworks had assessed, only
Fiji was found to be a success for the Pacific islands. It ranked lowly at 86th in the world, but
11th in the East Asia-Pacific region.
Digicel in the Pacific
Mahendra
Reddy
recalled
the
difficulties
Digicel
had
had
trying
to
enter
the
telecommunications sector when Vodafone had been the sole incumbent mobile provider.
Even after Digicel had arrived, Vodafone had foreclosed the market to them by entering into
long-term contracts with its customers.
Digicel had brought their case to a commission,
which had told Vodafone to annul all of those contracts in order to allow competition.
Maltese exports
Malta was one of the most open economies in the world.
The country was exporting to
foreign markets more than it sold to its domestic market. It had to compete against many
other much larger and more resource-rich countries, but was constrained in its attempts to be
competitive for various reasons including: its inability to benefit from economies of scale,
such as by sharing overheads or buying better technology; high transport costs due to
insularity; a small pool of human resources; and a poor natural resources endowment.
Despite these constraints, the country had a relatively high GNP per capita and registered a
high HDI score, as did many other small states like Luxembourg, Iceland and Singapore.
Mauritian trade preferences
The case of Mauritius was a clear example of the divesting impact that the removal of trade
preferences could have on a small economy.
Its economy had been dealt a serious blow
because its growth strategy relied on this preference.
Mauritius had achieved remarkable
progress during the 1990s, with a growth rate of over 5%, but this had fallen to around 3% in
the early 2000s, reflecting the dismembering of the Multi-Fibre Agreement, lower guaranteed
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Meeting of Experts on Growth and Development
17-18 November 2011
sugar prices from the EU and higher costs for import commodities, especially petroleum and
food.
Practical suggestions
G20 framework
The Commonwealth Secretariat had been collaborating with the University of Malta and
Lino Briguglio to produce some fruitful work on vulnerability. They had partnered to develop
a resilience-building framework for small states, which had evolved into work that was
delivered to the G20 Development Working Group on growth with resilience.
This was a
long-term broad-based macroeconomic management framework that suggested more exactly
defined fiscal responsibilities, particularly in the context of debt management.
Indicators
Chris Said was particularly interested in the development of a resilience indicator that could
be used to identify which policies were helping states withstand their inherent vulnerabilities
and explain why some countries were able to achieve faster rates of economic development.
External debt featured prominently as one of the sub-indicators of resilience, but domestic
debt was left out.
Perhaps the assumption was that the exact levels of small states’ debt
were of continuing dispute.
Education resources
Priority needed to be given to the generation of appropriate financial and human resources for
cross-sectoral coordination of education efforts. International support for education in small
states remained vital if existing achievements were to be consolidated in ways that would
promote sustainable growth and development. Skills training needed to be provided for the
young that related to local entrepreneurship and employability.
Higher education needed
better coordination, regulation and integration for enhanced engagement in the knowledge
economy, and local research had to be increased in ways that were sensitive to social and
economic policy and practice.
Larger countries
While appreciating the specific concerns of small island countries, it might also help to study
what more advanced regions were doing, so as to avoid the pitfalls encountered in their paths
to development.
Unique biological knowledge
Over the years, indigenous knowledge had been converted into money, particularly by
pharmaceutical companies and research institutions that were making drugs, for example.
Little of that money had gone back to the people who owned that knowledge.
Natural
products like kava, cassava and coconut had all been patented by German or American
companies. There was the potential for Pacific island people to use their knowledge of the
environment for their own growth and development, instead of allowing this to be taken away
through bio-piracy.
This incorporation of an informal knowledge system into the formal
knowledge economy required innovation and training to be successful.
Competition law
The Secretariat had developed a large body of literature to the point where a model
competition law and policy framework could be adapted for the Pacific. This was available on
45
Meeting of Experts on Growth and Development
their website.
17-18 November 2011
It might also help to place more emphasis on the current barriers to
competition.
Research suggestions
Resilience indicators
Lino Briguglio was updating his indicators with explanations to show how, even when a
country was vulnerable, it could succeed. Tihomir Stucka desired a clearer emphasis on the
extensions to research that resilience indicators offered.
Exploring other measures of
openness, export concentration and export sophistication might be worthwhile.
Papers
published by Marion Jansen from the WTO, or others on the World Bank website, might be of
assistance in that respect.
External shocks
Gérard Adonis’ comprehensive presentation had suggested that SIDS were more vulnerable to
external shocks than LDCs, because they were less competitive and had difficulties in
attracting FDI. A more rigorous quantitative method of modelling these claims could strength
these results.
Pacific island knowledge economy
Steven Ratuva’s presentation was based on a proposal for research, highlighting the big gap
in understanding of the Pacific’s knowledge economy. Much work was required to learn if the
Pacific was perceived to be vulnerable in terms of its natural calamities, economic resources,
production factors, etc.
Education for sustainable development
There had been very little research into education for sustainable development in small island
states, what this actually meant and how it could contribute to disaster preparedness for
example. It would be interesting and informative to carry out a survey to learn about any
new initiatives and ways to inform educational planning. Lino Briguglio agreed with this point.
He had, in many countries, seen children educating their parents. The effect this could have
on the future generation was an important topic. It was also important for this group to try
to identify which social policies were seeing the most success.
Genetic resources
Another proposal for research was an analysis into the potential of genetic resources of
traditional knowledge and thought law in SIDS. ‘Genetic resources’ was a reference to what
could be derived from biodiversity resources, often for medicinal purposes.
Trade preferences
Research was requested on the removal of trade preferences from small economies, and how
this related to their growth and resilience, but Sudarshan Gooptu was unsure of the benefit of
this debate taking place at a non-political level. It was believed that no studies were available
that measured the impact of these changes, even though they had clearly had an effect on
the fisheries industry in the Seychelles, for example.
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Meeting of Experts on Growth and Development
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Good Governance and Economic Sustainability
Relevant presentations
•
Anthony Birchwood spoke on fiscal and monetary rules for SIDS to follow.
•
Marielle Goto’s presentation addressed contrasting debt profiles in small states.
•
John Roberts attempted to find a green escape route out of the middle-income trap.
•
Terra Sprague presented findings on the history of and implications for education in
small states.
•
Philip Osei’s presentation was on the nexus between public sector reform and efficient
management of social policy.
•
Naren Prasad reviewed some of the work ongoing on social policies in small states, and
summarised findings from the UN Research Institute for Social Development
(UNRISD).
•
Stephanie Vella and Gordon Cordina focused on research and innovation in small
states within the EU.
•
Roger Hosein’s topic was small mineral-dependent states, new service market exports
and the idea of diversifying into medical sectors.
•
Tihomir Stucka addressed the subject of fiscal and debt sustainability in Pacific island
countries with trust funds.
•
Joan Nwasike looked at how centres of government contributed to development,
focusing on three Caribbean states and their governmental structures.
Economic problems
The financial crisis
The global financial crisis had contributed to worsening debt-to-GDP ratios and reductions in
remittance flows to many small states. There was also a danger that social policies would be
used to tidy up the human suffering and insecurity left in the wake of the crisis. The trap of
social protectionism had to be avoided.
Debt profiles
Debt-to-GDP ratios were unsustainable in many SIDS, especially in the Caribbean, where for
some they were more than 100% of GDP. The EU’s debt-to-GDP ratio guideline was 60%,
but some participants found this ‘magic number’ unhelpful, as it failed to show whether debt
had been incurred to pay for infrastructure and innovation, or wages, for example.
The
quality of the debt merited some in-depth consideration and greater emphasis. In Europe,
there had been lengthy discussions on this topic as part of the Growth and Stability Pact, but
the position was likely to change so as not to punish countries that had to incur debt in order
to make developments. The global debt situation was also affected by external shocks like
commodity price rises, natural disasters and depleting foreign reserves.
External debt
It was more difficult for small states to have external than domestic debt.
Most small
countries had levels of external debt in terms of GNI that were above low- and middle-income
47
Meeting of Experts on Growth and Development
17-18 November 2011
countries. The Gambia had a long history of high external debt; and levels had been rising in
the Seychelles for the last two years. Guyana had had very high debt, reaching up to 800%
at the beginning of the 1990s, but had progressively reduced to under 100% by 2008,
although this was still large by international standards.
Public versus private debt
Most external debt was public. The average external private debt in middle-income countries
had been lower than 50% over the last period. Papua New Guinea had a high public external
debt.
Concessional debt
Developing countries and small states had high levels of concessional debt. Most of Belize’s
total external debt was concessional, but concessional debt in the Seychelles tended to be
under average.
Maturity of external debt
Comparing the external long-term against short-term debt stock showed that it was quite
stable in low- and middle-income countries, at a level between 10% and 20%. In Belize, for
example, short-term debt had been almost non-existent up to 2009, while the Seychelles
employed a different structure of related maturity.
Debt service
The debt service situation contrasted across different countries and periods. By 2008, Belize
had had a very high level of public and public-guaranteed debt service, above 50%.
The
same had been true for Guyana at the beginning of the 1990s.
Arrears and risk of public debt
Guyana showed a remarkable decrease in the quantity of its principal arrears against GDP.
The rest of the countries had very low levels of arrears. There were few debt risk links in lowand middle-income countries, with many small states in the same situation.
Belize and
Guyana were the major exceptions, the latter having seen some major debt episodes at the
end of the 1990s and in 2005.
Type of creditors
There was a rise in publicly granted private creditors in countries like the Seychelles and
Jamaica.
At the end of the 1980s in Guyana, about 70% of publicly guaranteed debt had
been attributed to private creditors, but this had since decreased.
There had been an
important rise in Belize too.
Debt trends
The external debt of small states was mostly but not wholly concessional, public and longterm. Marielle Goto discriminated between two groups of countries: those with external debt
below 50% of GNI, like Mauritius, Papua New Guinea and Tonga; and those with higher levels
of external debt, like Belize, Jamaica and the Seychelles. After analysing these figures, it was
clear that there had been several debt reduction, debt relief and restructuring initiatives,
especially in Guyana, Jamaica and Gambia.
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Meeting of Experts on Growth and Development
17-18 November 2011
Stabilisation
One reason for the implementation of fiscal rules was these unsustainable debt levels.
However,
countries
needed
to
develop
their
economies
and
infrastructures
while
simultaneously bringing about stability. Should they develop first and then try to stabilise, or
vice versa? That was a very difficult issue in practice. Advanced industrialised countries had
the advantage of a more developed private sector. They could simply focus their monetary
and fiscal policies on stabilisation, as the private sector would lead them to growth, but SIDS
often needed investments and fiscal injections into their economies.
Unemployment
One question raised was how growth was even possible with the high levels of unemployment
that had prevailed since the recession. Concrete policies were needed to address this.
Resource consumption
The truth was that all advanced industrialised countries, at some point in time, were likely to
use more resources than they were contributing, and SIDS were no different. The question
was whether it could be sustained. The global international climate had changed to rely on
credit ratings, which affected how attractive countries were to investors. Anthony Birchwood
had investigated whether neoclassical, Keynesian, and heterodox economic theory could
provide some guidelines.
Government expenditure
Another point for any country, as could be seen in the US, was that, once government
expenditure had increased, it was very difficult to decrease it.
There was little agreement
over whether you could reverse the debt overhang by reducing fiscal expenditure.
In a
democratic system, a government could find itself facing tremendous unpopularity by trying
to backtrack on some of the programmes on which it had already embarked.
Fiscal space
A recent performance influencing factor analysis (PIFA) had demonstrated many weaknesses
in small countries, in terms of their controls and accountability mechanisms. This prompted a
question about how to impose hard budget constraints and whether rules themselves were
enough if the institutions were not in place to enforce them.
Indicators
A paradox could be detected in the inverse relationship between human welfare and income.
The World Bank was considering an assessment of total capital assets, including produced,
institutional, human and natural capital.
Flight capital
Credit ratings were a useful indicator of foreign debt and investors.
Domestic debt and
investors, as well as the diaspora, mostly brought money into countries through portfolio
investment flows. They could translate very quickly into ‘flight capital’, which referred to the
first money to leave and last to return to a country. This implied that a foreigner was more
likely to stay in a small country with their debt than a domestic resident was. Such realities
ought to be highlighted, because they showed why it was difficult to implement fiscal and
monetary rules.
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The Human Development Index
The HDI went beyond income to look at education and expectation of life.
It revealed a
similar pattern between what were previously high- and middle-income countries; they were
stuck in the middle-income trap as well. To find the route from this trap it was necessary to
redefine wealth and growth assessments to include human and institutional environmental
capital.
Most CARICOM countries had high HDI scores, except Haiti and Guyana, so the Caribbean was
a fairly high-income area. However, the Gini coefficient, used to measure income inequality,
had revealed some disturbing trends. Likewise the percentage of the Caribbean population
below the poverty line was not very encouraging.
Income status
Many countries had been racing to achieve higher-income status, among them Singapore and
Hong Kong.
No middle-income country exceeded a GNI per capita per annum of $20,000.
Among them, Mauritius had experienced considerable growth since 1980, and so it had been
used as a stylised example of a middle-income country, but John Roberts cautioned that
much of what had been written about ‘the miracle of Mauritius’ was just propaganda.
Mineral dependency
Mineral-dependent states were a small group among all SIDS. One of the characteristics of
mineral-dependent states, as shown in the literature, was that they tended to be prone to
some degree of corruption.
Trust funds
Trust funds often came with some very stringent fiscal rules that meant that investment
income from them could only be spent many years later.
Tihomir Stucka had explored
whether they met their initial intention for countries to be able to survive on their own after
the grants had stopped flowing, if the financial crisis had had an impact fiscally and whether
there was a need to make fiscal adjustments to achieve self-reliance.
He had discovered that these funds had nothing to do with the financial crisis; issues of
economic structure accounted for these developments instead. This analysis suggested that
current grants policies had not fostered self-reliance in Pacific island countries.
The
conventional conclusion drawn was that these countries needed to gradually change their
economic structures, but this seemed to ignore whether this was feasible, given their history,
the absorptive capacity of the private sector and the consequences for growth.
50% of
employment in the countries studies resided in the private sector, where wages were twice or
three times that of the private sector.
The majority outside the public sector was in
subsistence fishing, agriculture and retail.
This presented a bleak outlook for fiscal
adjustments.
Insufficient governmental funding
One of the weaknesses of parliamentary democracies was a lack of fiscal accountability.
Vince Henderson countered that this should more often be the responsibility of the public
accounts committee than of parliament.
In most Caribbean states, such committees were
often ineffective if not non-existent, partly because of lack of funding. Opposition parties in
most islands seldom received any funding either. They lacked resources and staff, and often
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only had a small room somewhere in the parliament building. Therefore, they were unable to
provide the kind of oversight that their constitutions contemplated. Select committees and
the permanent secretaries accountable to them therefore had to take over this oversight
responsibility instead.
Additionally, it was helpful if some universal agreement on national
projects could be reached to avoid stalemate situations.
Economic solutions
Best practice
A recent IMF article had suggested combinations of fiscal rules for SIDS to follow to help
guard against short-sighted or opportunistic governments.
It employed four categories of
rule for: balanced budgets, debt, expenditure and revenue. Balanced budget rules enforced a
rigid cyclicality to reporting.
Debt rules were the most flexible, and stated that countries
should stick to their chosen debt-to-GDP ratio.
Expenditure rules recommended consistent
design and for countries to function within their limitations.
Revenue rules basically
concerned tax collection.
Theoretical approaches
In neoclassical theory, the idea was to have less government involved in the economy and
tighten inflation and monetary policy. This relied on a vibrant private sector as the engine of
growth. Most SIDS, however, were still trying to develop their private sector.
Keynesian theory focused more on unemployment, which had always been a problem for
SIDS. It envisaged an expansion of fiscal policy and relaxation of monetary policy in order to
stimulate economic growth and development. Many SIDS were likely to have been employing
a Keynesian approach, but the problem was it led to higher, and sometimes unsustainable,
debt levels.
The heterodox approach took a mixture of various policies, many of which were
micro-founded, but it also used FDI to stimulate economies.
Fiscal rules
The IMF imposed conditionalities on many SIDS, and those who borrowed from other
international institutions often faced some fiscal rules. The CARICOM had been trying to meet
these and was exploring the idea of converging to a single currency.
One particular rule
regarded servicing debt-to-GDP ratios, but many countries had been unable to implement it
and it was not enshrined in many constitutions or laws.
As well as adding it to the law,
Anthony Birchwood also recommended regular monitoring to check whether a country was
properly adhering. This could be external, such as through IMF surveillance.
Stabilisation
Sudarshan Gooptu agreed that fiscal responsibility frameworks enabled small states to use
their resources more responsibly. However, fiscal rules were more relevant to resource-rich
countries or those that could install stabilisation funds and employ individual policy
instruments. Stabilisation objectives perhaps needed to be more carefully explored.
Debt management strategy
Marielle Goto had stressed the importance of external debt reduction, showing how debt
structures had developed over time and how most of the debt tended to be grants and
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Meeting of Experts on Growth and Development
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concessional. Sudarshan Gooptu highlighted the large build-up of domestic debt now taking
place, while external debt was being extinguished.
There was a need for a medium-term debt strategy that incorporated both the external and
domestic sides in its planning. Some debt relief or prudent management had been achieved
in some countries in the past by MDRI and HIPCI, but it was important to ensure there were
no future problems. Just looking at external debt profiles might distract the discussion from
the series of ongoing crises that countries were facing, including food and fuel price increases.
It was clear that concessional and grant funding were declining.
Primary deficits in all
low-income countries were now above 4%, which was very high.
Sudarshan Gooptu
recommended a consolidated debt management strategy, rather than just focusing on the
external.
Economic independence
The primary motivation for using fiscal rules was to reduce vulnerability to unsustainable debt
and a high dependence on foreign aid. SIDS must always be conscious of their debt levels
and ensure that whichever government was in power it obeyed the same set of rules.
Independent enforcement and monitoring
Twinned with independent enforcement and monitoring, fiscal rules required effective data
collection and management to guarantee adherence and give some warning of a country’s
ability to meet its targets. Strong institutional and legislative frameworks would govern the
way that fiscal rules were enforced.
Statutory bodies
The discussion had mostly focused on central government, but statutory bodies also had an
important role to play in delivering goods and services and minimising contingent liabilities.
In small states, there was a problem with their business models and return on capital, which
could add to government liability.
A more appropriate model had to be examined.
One
participant related findings from the literature that argued that improved institutional
performance could reduce corruption by 10%, which would immediately have an impact on
growth. Some basic pointers about how that could be done would help.
Independence of central banks
Greater importance was generally being afforded to central bank independence. Papua New
Guinea’s Central Bank Act of 2001 had given its Governor enough power to prevent the
Finance Minister from transferring trust funds from commercial banks. Fiji’s Reserve Bank,
contrastingly, had been lending to the private sector, which was not a normal fiscal action.
Eastern Caribbean states used a single currency, as did six of the 14 Pacific island nations.
Papua New Guinea had created autonomy with it 2001 Act but, in Fiji and the
Solomon Islands, the central bank was largely seen as the handmaid of the Finance Minister.
Market interventions
Passive labour market intervention sought to provide income replacement. Such an approach
was very rare in the Caribbean, but Bahamas and Antigua offered these kinds of benefits.
Minimum wage increments were another response to crises.
Conditional cash transfers
provided for a certain amount of resources to be directed towards the population below the
poverty line in return for certain actions, similar to the traditional conditionality aid agencies
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Meeting of Experts on Growth and Development
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applied. People would only receive money if they immunised and registered their children, for
example.
Government facilitating business
John Connell wanted to develop a theme on the private sector that focused on SMEs and
multinationals, and the role they played in the fiscal and monetary policy, and infrastructure
support, of small states.
That role could be through clusters, export processing zones,
business parks and other means. In what ways could government best facilitate the work of
business and its links with banking?
The Common Market for Eastern and Southern Africa
(COMESA) was finding that banks had just not been responding effectively to the impact of
the financial crisis.
Most business was being done by small firms making loans between
$5,000 and $10,000, and the banks were just not interested in that scale of money. They
wanted to keep their capital assets, but economies were only likely to recover through better
support for new businesses.
In addition, very little was known about the way in which multinationals were operating in
small states and what aspects of fiscal and monetary policy needed to change to support their
links to economic development and employment. This was another important theme.
Private sector contributions
Some believed that growth and productive capacities would emerge from SMEs and the
private sector, as long as they had access to financing.
The World Bank and associated
agencies could look into a system to provide an instrument that would encourage
fund-holders and banks to provide long-term finance to businesses, which would help improve
productivity, and create real growth and productive capacity.
Trends in labour market policies
Countries were facing pressures to move from passive to more active policies where the
long-term effects could be felt. This recalled the story about how teaching a man to fish was
better than giving him one.
More emphasis would be given to social cohesion, because
although key stakeholders would be implementing the changes needed, any shocks had to be
absorbed by the people at large.
Competitiveness
Although competitiveness was largely a business enterprise issue, governments had a major
role to play by taking a lead in placing competitiveness on the top of the policy agenda and
taking steps to remove any bottlenecks that occurred.
Research and innovation
There was an important link between research and innovation in their role for economic
growth. For issues related to R&D, such as building research infrastructure, small states were
limited in terms of capacity and costs.
The European Innovation Scoreboard had been developed by the EU with the intention of
tracking how the R&D of member states and a number of other countries was progressing.
The countries included were scored against a number of indicators. One might expect small
states to perform weakly in measures closely related to critical mass, but better in areas more
clearly connected to innovation. The indicators included human resources, research systems,
finance and support measures, firm investment, linkages and entrepreneurships, intellectual
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Meeting of Experts on Growth and Development
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assets, innovators and economic effects. T. K. Jayaraman thought that many of these items
were alien to Pacific island countries. Basic skills and numeracy had to be developed before
they could really aspire to be innovators.
The majority of small states performed under the EU average. However, their behaviour was
not entirely homogenous. Theoretically, small states had to spread their resources thinly, but
this might lead them to specialise in certain aspects.
Larger countries tended to perform
better on the Scoreboard overall; small countries tended to show a more uneven
performance. The extent to which this mattered to achieving growth had been investigated,
and the findings showed that performance on the Scoreboard had a very perceptible effect on
the growth of countries with a population up to 9 million. A weak performance tended to hurt
small countries to a greater degree than larger ones. In other words, large countries resorted
to other resources to stimulate growth.
Human capital
It had been found from the study of the Innovation Scorecard that the most important growth
elements of research and innovation were human resources and intellectual assets.
This
strongly agreed with the theoretical predictions of endogenous growth models, which
emphasised the need for small countries to concentrate their efforts within the human capital
element. Despite the importance of human capital to innovation and the positive effects of
innovation on growth, the study learned that small countries were not generally devoting
much effort to this asset. There was no tendency for smaller countries to invest more than
the larger ones in human resources.
Likewise when it came to intellectual assets —
registration of patents, royalties and so on — the larger countries also generated a more
positive performance.
Foreign and firm investments
Small countries seemed to be directing their efforts on firm investments, supporting and
attracting FDI, forming linkages between academia and entrepreneurship, and focusing on
business expenditure and SME development.
However, few links had been found between
these endeavours and economic growth. This might suggest some misallocation of resources.
Trust fund dependency
One corner solution was to fiscally adjust and nothing else.
Another was to continue
increasing grants for Kiribati and Tuvalu beyond 2023. Many other options could be devised,
but these were the subject of ongoing discussions.
Saving
The primary purpose of trust funds was to help aid-dependent countries. That same purpose,
saving money for a rainy day, had now been adopted in Papua New Guinea, whose export
mineral revenues were being placed in trust.
The central bank had recently asked if trust
funds could be transferred from the commercial banks to them, so that that money
absorption could be achieved with inflationary potential reduced. Island countries, whether
dependent on aid or mineral revenues, had to ensure they kept rainy-day reserves and
avoided episodes of boom and bust.
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Social and political problems
Inequality
Commonwealth nations shared a set of common values – including democracy, peace and the
rule of law – but Kenrick Hunte was unsure that they were using them most effectively.
Some Commonwealth countries were among the most liveable in the world, but others were
not.
The problem was one of uneven development, creating low life expectancies, poverty
and institutional constraints, which needed to be resolved.
Human development
Of the 54 Commonwealth countries, 15 were at the lowest levels of the HDI, whereas nine
showed very high human development. Kenrick Hunte believed that this meeting should be
most concerned with moving that bottom group up a level. The majority of these countries
were in Africa, and they had been somewhat ignored. The Commonwealth should not operate
as a bipolar system between the rich and very poor, but should be better coordinated, if it
were to remain a viable institution.
Traditional leaders
Traditional belief systems were often reinforced by existing education systems and public
sector monopolies. The traditional authority structure of Pacific island countries was for the
village chiefs or ‘Big Men’ to hold major roles in governing their people, often with
considerable tension between them and formal governments. Traditional authority structures
were less participatory than the concept of democratic government; however, they were
accepted, just as central governments were accepted as a means to oversee economic life.
Governance structure
All states followed a particular architecture structuring how their government was managed
and controlled, and how resources could be used to meet the goals and aspirations of the
seated government. Policymakers would thus devise models of governance that suited their
capacity
constraints.
The
Commonwealth countries.
UK
governmental
system
had
been
adapted
for
many
Centres of government usually had a role to coordinate and
consolidate the government’s policies, but this was not necessarily the case in SIDS, because
one centre could comprise many institutions and several ministries.
More than for larger
countries, the Prime Minister’s office became the policy hub instead of the Cabinet office,
which tended to hold a minimalist role or was fused with the Prime Minister’s office.
Cabinet appointments
A greater number of portfolios being assigned to a Prime Minister might indicate an inflexible
constitution, one that required Cabinet ministers to be elected members of parliament.
Trinidad and Tobago allowed the appointment of Cabinet ministers who were not members of
parliament. The constitutional functions of the Cabinet were to give direction and control. It
was the principal policy instrument and it also had a collective responsibility to parliament.
Joan Nwasike had often found that these Cabinets performed only their bare functions.
Changes in the governmental architecture
Government architectures often changed with each newly elected government, causing a lot
of fragmentation within ministries. There were often no national strategic plans and it could
be difficult to reach consensus with the opposition on national priorities.
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Relationship with the Cabinet
When the Prime Minister was also the Chair of the Cabinet, the Cabinet would often change its
role and advise the Prime Minister of particular government programmes, compromising the
functions of collegial government.
Parliamentary accountability was another issue.
With
fewer than the normal number of parliamentary sessions, Cabinet decisions would often not
be debated in the assembly and discussions of legislative need would be avoided.
Executive control
The reality was that the executive controlled the parliamentary majority.
Caribbean states
prided themselves on being democratic but, without solutions to the aforementioned
problems, democracy remained uncertain. What needed to be shown was whether, when the
Prime Minister was also the Minister of Finance, this made a difference to the use of resources
and enhancement of economic growth.
It could be argued that this dual role was the
preferred structure, enabling the Prime Minister to get things done easily. Although such a
model was unlikely to be supported by investments from the international community, a
strong centre could allow better coherence and give the Prime Minister more time for his
strategic work.
Peace
It was easily forgotten, but growth could not come before peace, and peace required a social
policy that provided people with the bare minimum. Social protection could be sustained by
improving benefits and achieving efficiencies in management.
Social and political solutions
Governance
Democratic systems of government had electoral cycles. Competing parties would offer the
best terms and, if not guided by rules, were likely to violate the norms. It was necessary to
put fiscal rules in place that would guide SIDS or their prospective governments.
Elections
Vince Henderson concluded that politics was truly local.
With the rise of multilateralism, it
had become increasingly difficult to reach consensus, because Prime Ministers and Presidents
eventually had to go back home and run for re-election. People on the streets and the fear of
losing political power were other realities with which the elected must deal.
Flexibility of governmental systems
The roles of Cabinet, the office of Prime Minister and lead ministries in the Caribbean had
slightly different meanings from the true Westminster system.
Since accepting these
constitutions, many countries had done little to study them to check they were best suited for
the realities of their size and economic base. However, currents systems of governance in the
region were very flexible. A Prime Minister of a Caribbean country was very powerful because
he did not depend on his Congress. Size again was the primary consideration in defining the
reality of this governance structure.
Organic governmental systems
Some argued that politics was not about the perpetuation of elected persons, but about
governance; and governance could be divided into representation and administration.
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Empirical evidence from the Caribbean demonstrated that those skilled at representation were
not necessarily skilled at administration.
Kenrick Hunte discriminated that one of the outcomes of the discussion had been the
separation of matters
of state from
matters
of
governance.
The
Caribbean and
Commonwealth structures provided for a head of government and another head of state, but
one of these people would often be overworked, while the other was not doing as much as
they should. Perhaps the underworked could take on more governance responsibilities.
Researching social policy
There was currently no coherent research on social policy in small states. It was neglected in
favour of work on environmental and economic problems. Therefore, whatever social policy
existed in small island countries was always piecemeal, fragmented and project-based, and
seldom coherent.
Defining social policy
Social policy could mean different things to different people. Economists thought of it as the
role of the state to provide services that were not offered by the private sector, whereas
political scientists thought of it as being about power relationships.
A 1957 UN report had
spoken about how social objectives should be built on an equal footing to economic
objectives, but researchers and economists tended to forget this issue.
However, Naren Prasad sought to avoid defining social policy. Recent research characterised
it as a staged intervention that directly affected social welfare, institutions and relations. This
encompassed four key phrases: the redistribution of resources; production; reproduction; and
social production issues.
In the conceptual framework for approaching social policy, these
were always linked to economic policies.
Understanding social policy
Although
social
policy
meant
different
things
to
different
people,
researchers
and
policymakers usually understood it as a political tool to diffuse power and bargain for things.
To understand social policy it was necessary to understand economics. It should not be left
to anthropologists and sociologists.
Economists needed to understand their tax systems
because social policies required financing.
Private sector innovation in social policy
John Connell commented on how the European model of social policy had been enormously
influenced by private sector innovation. For example, Cadbury had developed social housing
and had improved working conditions; Rowntree’s had been one of the first investigators into
poverty and its relief; and Michelin had established new styles of social housing and working
conditions for its workers in France.
There were further examples of socially funded
healthcare and free schools offered by various charities. There may be hope for the future of
small states in private sector and not-for-profit development.
It was possible that the ILO
could help promote this.
Philip Osei responded that the private sector had participated in social policy in a significant
way, particularly through social insurance such as pensions.
NGOs and churches had also
done much work in the fields of education and healthcare, although they had often been
surpassed by new states in the period of terminal colonialism.
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Private participation existed, but only in specific social segments. It was perhaps increasing
now, specifically in education, business involvement and community-based organisations.
Naren Prasad related how, in the Pacific islands, the informal sector helped to meet the
growing need not covered by social security schemes. However, the problem should not be
shifted on to the private sector to solve, as social security was a human right; it was
Article 21 of the Human Rights Declaration.
The private sector could not be relied on to
ensure that such rights were being respected; this was a responsibility of the state and its
government.
Human development inequality
Kenrick Hunte outlined some measures that the Commonwealth, World Bank and donor
governments could take to resolve issues of human inequality. Currently, donor government
projects worked independently of diaspora migrants, resulting in a disaggregated system,
where different donors and governments functioned in different areas. Better collaboration
would produce synergies for better effectiveness.
It was also necessary to find meaningful ways to build institutional capacity and share
expertise.
Collaborative mechanisms were needed to incorporate diaspora contributions to
the development process, and incentives could be provided for the diaspora to allocate a
proportion of their remittances into investments. Some more data was necessary in this area.
Donor funds could be better leveraged if countries worked together in a better way. Right
now, with the financial turmoil and other global difficulties, financial support was disappearing
at a time when many Commonwealth countries increasingly depended on aid.
Education
A clear commonality that came across in all the research was the important role education
played in economic development.
Commonwealth small states were largely making good
progress towards universal access to primary education and gender parity. The Caribbean in
particular showed strong gender disparity in favour of girls in education, which was unusual
compared to the rest of the world. Not all small states had achieved the MDGs, but many had
a long history of extending the boundaries of basic education for greater access. They were
shifting educational priorities towards a focus on quality, effectiveness, inclusion and skills
training and, in so doing, had generated much insightful and valuable experience from which
others could learn.
A fundamental issue the education system needed to address was how to bring about
economic development while keeping an ecological balance.
An early consciousness of
ecological issues would ensure generational equity for all time. The integral role of education,
whether in sustainable development or entrepreneurship and skills, was thought to some to
have been the basis of many of these discussions, yet there was a danger of it slipping off the
research agenda. Terra Sprague urged that it be kept alive in continuing debates about small
states.
Case studies
History of small states education literature
Terra Sprague’s presentation was based on a paper created jointly with Michael Crossley from
the University of Bristol and representatives from the UNESCO Institute for International
Education Planning (IIEP).
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From the 1960s and 1970s, the focus on small states literature and research had
predominantly been on politics and economics but, in the 1980s, education had emerged.
This had begun with the 1985 Mauritius Meeting of Experts on education in small states. The
focus of most research from the mid-1980s had predominantly centred on ministerial and
school management, leadership and planning. Terra Sprague’s research project had run from
2009 to 2011, beginning at the 17th Conference of Commonwealth Education Ministers
(CCEM). It had also built on a 1999 review by Crossley and Holmes on a similar topic.
Public sector reform in the Caribbean
Philip Osei gave an overview of past projects into: the implementation of new public
management; the Canada-Caribbean leadership development project; practical capacity
development work shared between colleagues from St Kitts and a private consortium
company in Germany; and a process evaluation of a labour market intervention in Jamaica
called Steps to Work. Generally, he had examined the broad background of 30 years of public
sector reform in the Caribbean as well as responses to external shocks.
This included the
triple crisis of oil, food and finances, and the social policy responses that had been generated
to solve them.
Three generations of public sector reform could be detected over the last 30 years. The first
had been the structural-adjustment-related reforms; next had come new public management;
the most recent had been the response to this triple crisis. The focus of this work was on
whether public sector reform had been leveraged for the efficient management of social
policies.
A 2009 study by the Organisation of Eastern Caribbean States (OECS) had
highlighted management capacity deficiencies and fragmentation and hence a need for
integration for high-impact programmes.
St Lucian labour market
Philip Osei had participated in a St Lucia study that examined some critical issues to do with
the management of labour market programmes and the need to improve education and skills
training for vulnerable groups.
Jamaican employment
Philip Osei had worked on a recent report with the Ministry of Labour in Jamaica on
inadequate management information systems and insufficient numbers of social workers. The
‘Steps to Work’ programme, for example, was suffering because its 3,062 clients were only
being served by about six key social workers. This was grossly inadequate. Andrew Downs’
work on active labour market policies had also highlighted the need for improved information
systems and a more meaningful management of labour market interventions.
Debt in Mauritius
Mauritius had a strategy to keep external debt low.
In 2008, it had implemented a public
debt management Act with a debt target of 50% of GDP by 2013. However, it should not be
forgotten that the domestic debt of central government had represented about 45% of GDP in
2009, while the external debt had been about 6%. Total public sector debt in 2009 had been
about 59% of GDP, so not as good a situation as had been presented by the external debt.
Mauritius had been able to implement a similar reduction package after the 2008 global crisis.
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Debt in Papua New Guinea
Papua New Guinea was one of Marielle Goto’s sample countries with the lowest level of debt.
Their domestic debt had been 19% of GDP in 2009, and public external debt had been 13%.
Global debt in this country had decreased through the years.
In the 2000s, they had
experienced a positive shock with a boom in commodity prices, mainly through coffee or
mineral revenues.
Part of that windfall had been targeted at decreasing the debt so that,
during the 2000s, the gross public debt of Papua New Guinea had decreased by 40 points of
GDP.
Mineral dependence in Trinidad and Tobago
Trinidad and Tobago benefited substantially from its natural resources, particularly petroleum,
producing about 5 billion barrels of oil to date. Production of crude oil, however, had started
to fall and prices were falling too from their July 2008 peak of $147 a barrel. This had sent
the Trinidad and Tobago economy into a recession that was expected to continue through
2011.
Another feature of Trinidad and Tobago was that the petroleum sector came to
monopolise output. After 2008, the share of this sector in total output had been consistently
in excess of 40%.
The heavy growth rate between 1994 and 2008 had promoted certain lines of behaviour.
Trinidad and Tobago had introduced a make-work programme that had added very little
value.
The country also became heavily dependent on the US for a number of handouts.
Trinidad and Tobago was also a classic example of an economy rooted in the phenomenon of
Dutch disease.
With declines in reserves of both natural gas and crude oil, it was now
imperative for the country to diversify economically. A transition probability matrix was used
to show the change and revealed comparative advantage for the Trinidad and Tobago
economy between 1993 and 2008 and 2010. It showed a high persistence of starting and
remaining in a state of comparative disadvantage. This pointed to the need to do something
different to transform the economic structure.
Research on social policy in small states
The questions Naren Prasad had asked were whether small states were making different
choices on social issues and if some had been more successful than others. He also looked
at: the effect of democracy on social policy; the welfare state regime literature; the power of
jurisdictional resources; and levels of social cohesion and how they affected social policymaking.
Twelve country case studies had been conducted. This research was in its final stages and
some of the papers had already been published on the Commonwealth website. Many of the
small island countries told similar stories, but some were doing better than others.
This
meeting had examined successes such as Hong Kong and Singapore. Fiji had appeared to be
following their example, but was now faltering.
A principal finding was that countries that had implemented universal social policies – whether
for education, pension coverage or health coverage – were most successful. Deliberate and
considered social policies, which were linked to the developmental state literature, most often
brought about successful results. Common areas of emphasis included education, financing
social protection, ideology and social cohesion.
Democracy mattered, but there was no
one-to-one relationship between social policy and democracy. The most pressing conclusion
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Meeting of Experts on Growth and Development
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was that social and economic policies always had to be linked, with finance ministries and
economists involved in their design.
Universal social policies in Malta, Mauritius, the Seychelles and Barbados
Malta demonstrated high levels of education development and infrastructure. The same could
be said of Mauritius, which had pursued the same successful policies from the 1950s. Their
pension system had become universal in the 1970s, something perhaps only 15 or 20
countries in the world offered.
The Seychelles were an interesting case study because,
although they had an authoritarian regime, their policies depended on an ideology of social
justice that provided good healthcare and education, and eventually universal pension
coverage. Barbados had also been doing well with their universal social policies. Samoa had
the right ingredients to be like Malta or Barbados in the coming years.
Examples of social policy success and failure
Granada was having success with its gender-equality policies, and Trinidad and Tobago was
doing pretty well thanks to their rents from minerals and oil. However, Trinidad and Tobago
and especially Barbados had problems with social tensions and violence. Some relatively rich
countries, like Jamaica and Fiji, had flopped and failed for various reasons.
Usually ethnic
components and social cohesion played a role, as well as a lack of political stability or vision.
Due to political unrest and poor policy choices, Guyana had been unable to improve its social
policy.
Singapore
The Singaporean Government had gained independence in 1965, and the first thing they had
done was nationalise their education system. English had been chosen as the first language,
removing the chaos of using Chinese, Malay, Tamil and Indian, and they had adopted the
international O- and A-level qualifications. Another important change had been to housing.
The Singaporean Government had put 80% of people in subsidised public housing. Part of
people’s salaries would be allocated to a provident fund, which would be used to build or pay
for homes.
However, Singapore did not believe in the welfare state model, and food and healthcare
facilities were not free. Wong Poh Poh conceded that the system was not perfect; there were
still some who fell through the gaps of the social net and needed a hand up. For them there
was a social welfare scheme. Poor children who could not afford food or schooling would be
given a sum of money to contribute towards those essentials.
Naren Prasad had included Singapore into his research on successful social policies, but he
had given more prominence to places like Vanuatu and Malta in his presentation, as they
were less often the subject of case studies. He was also unsure how the policies created by
the Singaporean Government in the 1960s could be adapted to other countries.
Government structures in Dominica, St Lucia and St Vincent and the Grenadines
These countries were all members of OECS; and their Prime Ministers were also Ministers of
Finance.
In Dominica, the Prime Minister was responsible for finance, foreign affairs,
information and technology.
In St Vincent, he was responsible for finance and planning,
national security, legal affairs, ports, electoral matters and telecoms, along with some line
ministries.
In St Lucia, the Prime Minister was responsible for the finance portfolio,
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international financial services, planning and national development, physical development,
housing and urban renewal, local government and the environment. What time did this leave
Prime Ministers to develop international strategies and connections?
Debt in Dominica, St Lucia and St Vincent and the Grenadines
The external debt stocks of Dominica were 69.9%; of St Lucia, 47.7%; and St Vincent and
the Grenadines, 37.2%.
infrastructure projects.
Carrying these debt levels left very little money for capital and
These debt levels were coming down, but Joan Nwasike wanted to
know whether, because they held finance portfolios too, the Prime Ministers of these three
countries were contributing to this decline in debt by instilling better fiscal discipline in their
Cabinets.
Experience of Dominican government
Vince Henderson had served as a senior minister in the Government of Dominica from 1999
to 2009. He stated that a true democracy was a very expensive undertaking that came with
some serious challenges. Holding multiple portfolios was not a deliberate attempt to pervert
inherited systems of governance, but often a result of SIDS being unable to afford true
democracies.
Adding portfolios together might appear to make little sense, but it was a
necessity enabled by the flexibility of the system. In the case of Dominica, three non-elected
members of parliament could be appointed as ministers through the senate route.
The
country could therefore appoint as Senators the people who had the skills it needed.
Experience of St Lucian government
In St Lucia, only two ministerial positions were mandated to be occupied by elected members;
these were Prime Minister and Minister of Finance.
In St Lucia, a minister had had to be
removed, so the Prime Minister had decided that the safest thing to do was to bring
everything into his office. If he had not done this, he would have become an overseer, just
ensuring that everybody else was doing their work. The Prime Minister’s office itself was little
more than a fiction with a ceremonial purpose.
The Cabinet basically ensured collective
responsibility for decisions taken.
Trust funds in Pacific island states
Tihomir Stucka had studied five Pacific island countries with a total population of around
300,000, Micronesia being the largest and Tuvalu, the smallest.
Three of them received
grants from the US for current spending and also inflows to their trust funds. Tuvalu’s donorbased trust was not as stringent as others, and Kiribati’s was a completely different animal,
because it was resource-based and stemmed from phosphate mining.
The Pacific countries all had reassuringly low and declining gross debt levels, and trust funds
too. Marshall Islands and Palau had capital in their trust funds equivalent to between 50%
and 70% of GDP. Kiribati and Tuvalu had trust funds the size of multiple GDPs. However,
Kiribati’s fund used to be eight times the size of GDP but had since halved, so this money
could go away very quickly. The growth outlook for these countries was rather bleak, and
their economies were mainly public sector driven. Their budgets were highly aid-dependent,
with domestically generated revenues hardly financing the wage bill.
Kiribati was running
unsustainable primary deficits at around 10% to 15%. The situation in the Marshall Islands
was identical to Micronesia: primary surpluses would persist until 2017; grants would
discontinue in 2023; and they were already writing overall deficits.
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By looking at how much of the primary spending could be financed with domestic revenues, it
was apparent that the shortfall was huge, at around 30% to 40%.
The compact countries
were able to run surpluses because of their grants, but these same grants were declining over
time.
They were linked to US inflation, whereas nominal GDP in these countries was real
growth plus inflation, hence the gradual decline.
The investment income coming from the
funds, supposedly to cover the difference from the grants, would not suffice and the revenue
gap would explode.
Tracing the consequences of this on public debt clearly showed that Kiribati was on an
unsustainable path.
It could use capital from its trust fund now, but then there would be
nothing left in 10 years. By balancing it out, it might last 20 years, but to keep the value real
this country would need to start borrowing.
lingering around 40%.
Micronesia and the Marshall Islands were
By 2024, their debt trajectory would be exponential and clearly
unsustainable.
Practical suggestions
Governmental structure
It could be instructive for the international community to study governance architecture in
order to learn where a government’s power was located and thus derive maximum impact.
Governmental challenges
As part of the closing discussion on the first day of the meeting, it was decided that a clear
goal was to examine some of the governance challenges, particularly around transparency
and corruption.
Addressing these could promote efficiency both in the economic and
environmental spheres. A facilitative governance set of activities would improve the way that
small states could ready themselves and create a pathway towards green growth.
Policy implementation and information sharing
One speaker suggested that the group should examine some of the trickier implementation
issues related to institutions, governance and political economy.
Small states across the
globe could help by sharing their lessons and experiences. A good starting point might be to
look at some stories of successful transformation to demonstrate what could be done.
Sudarshan Gooptu stressed that, in times of declining budgets, the best thing to do was to
work together and leverage whatever resources were available, just as small states were.
Many other forums were able to promote harmony and coordinate implementation across
institutions, such as the consultative group meetings, which included participation from all
agencies and ambassadors.
This body assisted in the dialogue with policymakers and the
presentation of an analytical and considered view of the options.
Education
Sustainable development could be integrated into the national curriculum through subjects
such as English, maths, science and social studies.
The integration of sustainable
development into a curriculum would be a means to prepare pupils to have a positive input in
their country’s future development. However, some people felt that there were insufficient
resources and trained personnel to teach this subject.
Others argued that sustainable
development and agriculture should not only be promoted in schools, but to the public in
general across all small countries.
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Debt relief initiatives
Guyana and Gambia had benefited from the Multilateral Debt Reduction Initiative (MDRI) and
the Highly Indebted Poor Countries Initiative (HIPCI).
Belize had gained from Debt For
Nature 2001, which provided debt relief on the condition that Belize protected several
thousand acres of its forests.
Debt management strategies
One speaker stressed the importance of developing explicit debt management strategies that
Finance Ministers could put into effect.
Such policies would cover expenditure use, fiscal
management, details about allocation and operating capital ratios. Policymakers needed such
clarity to help prioritise expenditure at a time when cuts were being made. It would also be
helpful to show the agreed norms for fiscal policy, such as a balanced budget.
Debt restructuring
Governments might be interested in learning how they could manage their debt and fiscal
policies while transforming their public sector into high-performing institutions. Some kind of
debt restructuring that used private sector input might be a component of those plans, as well
as incorporating new measures from ministries.
The last Small States Forum had held a
special technical session on debt, when a proposal had been announced to restructure debt
with private sector development embedded.
There was more information about that
approach on the World Bank’s website.
Understanding fiscal policies
Marielle Goto stressed the requirement for governments to understand how their fiscal
policies were affecting their debt situation, so that they cold form middle- and long-term
positions.
This would help avoid the middle-income trap that countries fell into when they
were unable to benefit from concessional loans. It was about the trade-off between taking on
more debt and becoming more developed. Maybe the alternative was to attract more capital
from the diaspora, because ultimately external debt had to be financed through foreign
reserves.
Contingent liabilities
The examination of debt-to-GDP ratios could also have shown contingent liabilities.
Governments’ physical policymaking was a very important process, and the IMF was able to
outsource it if they found that conditionalities were not being met. Recently, Fiji had had to
borrow at an interest rate four times higher than they could have obtained from the IMF
because of these conditionalities, some of which were quite unreasonable.
The IMF was
therefore also contributing to debt build-up in small states.
Research suggestions
Governmental structures
Research was required on how the structure and functions of the centres of government in
small states facilitated the development agenda and coordinated policies.
Were these
structures inclusive and did they legitimise the input that opposition parties could have in
national projects? What were the possibilities for more democratic governmental frameworks
in small states? Vince Henderson felt that more work needed to be done on the effectiveness
of parliamentary democracies and the allocation of portfolios. Few Caribbean Prime Ministers
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allowed anybody to interfere in how that was done, because they needed this flexibility in
order to deliver goods and services to the people. Another participant proposed that research
should focus on new governmental structures that utilised best practices, and looked at
resources and affordability, to enhance the process of governance to specific ends, which
were for human, economic and overall development.
New forms of governance
Lino Briguglio guarded against the ‘Delphi approach’ being taken by the experts in the room.
Perhaps a more entrepreneurial style was needed to propose new forms of governance, in
which as many people as possible would be surveyed and asked what they thought should be
done in their countries.
This might produce some more innovative and modern ideas that
would speak to a new generation, as well as being more democratic.
Sudarshan Gooptu appreciated the suggestion and likened it to some of the work in the
Middle East and North Africa to create a knowledge agenda. In certain areas, young people
were involved in producing a ‘MENA Knowledge Report’ that was taking a similar approach to
that suggested above.
The draft document had been uploaded online with a blog, so that
anybody could add their views.
Independence of institutions
Institutions helped create accountability and stability in society, but they had to be separated
from the political cycle. Kenrick Hunte asked if some research could be done on this topic.
Public sector reforms
Philip Osei presented some questions for future research: did the creation of highperformance institutions during public sector reforms generally bypass social development
ministries?
If so, had ministries of social security, welfare and transformation in the
Caribbean actually benefited from capacity development programmes? Considerable studies
were required to link public sector reforms and the management of social policies to the
development of basic management capacities.
Social policy
There was a need to look more deeply at how social policy was influencing development and
social cohesion in small states. Lino Briguglio added his support for more work on the effect
of social policies on social cohesion.
Research and innovation
The results from the study of the European Innovation Scorecard required further refinement,
but pointed to a promising area of further investigation that could be extended to other
regions.
Lino Briguglio proposed extending that research internationally to identify which
areas of innovation should be prioritised by small states. Should they try to invent machines
or improve their manpower?
Fiscal rules
Anthony Birchwood suggested some further research to investigate whether new independent
agencies were needed or if existing bodies like the IMF and World Bank could be relied on to
monitor SIDS and their fiscal responsibilities.
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Fiscal space
More discussion was needed on the possibilities, in a context of limited fiscal space as well as
the political economy, of external influence and what donors could do. This was a challenging
area but a possibility for future research.
Trust funds
As well as the useful description of the workings and importance of trust funds provided, it
might also be helpful to explain why such funds had initially been set up. The trust fund had
been envisaged as a ‘rainy day fund’; clear objectives were needed on how to use these
resources. Fiscal rules might be a good idea, but trust funds already had strict sets of rules
about when and how the money could be spent. Perhaps such an approach could be applied
across a country’s overall budget.
Sudarshan Gooptu suggested further research into the
links between trust funds and government spending.
It needed to show more information
about how money was being spent, where and what mechanisms were in place to generate
growth.
Output growth
According to Sudarshan Gooptu, Marielle Goto’s paper on debt sustainability and fiscal
consolidation would have benefited from some discussion of output growth, elasticities and
incremental capital output ratios (ICORs).
The question worth asking was whether fiscal
consolidation and the money being saved would then be transferred into sectors or
expenditure that would generate growth.
Regional Integration versus Individual Sovereignty
Relevant presentations
•
Rose Azzopardi looked at regional integration agreements, the effects of economic
integration and the role regional trade agreements (RTAs) held in small states.
•
Sanjesh Naidu presented on the broad topic of the role of regionalism in the
development of small states, from a Pacific perspective.
•
Donna Lee gave some policy lessons from her investigations into small-state activism.
•
Siva Palayathan addressed the Doha development mandate so far, and the proposals
on the table.
Background
RTA statistics
By May 2011, there had been almost 500 RTAs notified with the WTO – 358 under Article 24
of the General Agreement on Tariffs and Trade (GATT), 36 under the enabling clause, and 95
under Article 5 of the General Agreement on Trade in Services (GATS). Of these, almost 300
were actually in force. If you split them up, 90% were shallow integrations looking at free
trade agreements (FTAs), and 10% were deeper arrangements, such as customs unions,
common markets, and monetary and economic unions.
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Small states’ involvement
Of the 45 small states covered in Rose Azzopardi’s study: 12 in Latin America were engaging
in three RTAs; 15 in East Asia-Pacific were in 12 RTAs; 11 African states were in seven RTAs;
and, over the other regions, seven states comprised 41 RTAs. Many of this last group had
inherited RTAs from the EU. Discounting the EU, there were 20 RTAs among the remaining
38 states. Three of the 45 countries did not participate in any RTA and 25% were engaged in
deep integration arrangements from customs union upwards.
scope or economic integration agreements.
The rest were either partial
Africa was an example where agreements for
small states dealt only in the trade of goods, whereas Latin America and East Asia-Pacific
cared more about services.
History
When attempts had been made to play the regional card in the past, it had not been roundly
accepted by many countries or potential countries, which wanted first to become their own
states before being members of a region.
The West Indies Federation had collapsed; and
Singapore and Tuvalu had gone their own ways. Once these countries had become sovereign,
they perhaps realised that the effectiveness of that sovereignty had been jeopardised.
Nobody questioned that sovereignty, but how could it be operationalised effectively?
Sovereignty provided the basis for confidence in negotiations, but there were back-up
options, in the form of regionalism, if these countries should want to engage in a more viable
or politically acceptable way. Analyses of efficiency and regionalism showed how small states
could pool their resources to their advantage at an appropriate level.
Individual sovereignty
Territoriality
The problem with the Vulnerability Index and also with the concept of a small state as a state
was the nature of territoriality. States were territorial beings: they maintained governance
over a population in a particular territory.
However, this was a contradiction in terms for
small states. There was no way they could survive just by managing their territory, as they
had to maintain and cultivate external links.
The problem was therefore oxymoronic: how
could a small state be successful when success depended on being more than just a small
state?
Globalisation
Globalisation – the pace at which the world was becoming more connected – was affecting
different countries differently. Small states had to search for the most appropriate degree of
sovereignty.
Difficulties
With these ongoing capacity issues in the context of a globalised world, island states were
faced with two major sovereignty difficulties.
One was the need to formulate and enforce
effective national policies; the other was to provide essential services to their people. Here
Sanjesh Naidu cited the almost non-existent competition regulations discussed elsewhere.
Pacific regionalism would reinforce effective sovereignty which, with enough instruments and
institutions and by increasing access to better services, would improve the economic
possibilities of the region.
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Regionalism test
A test could be applied to decide whether regionalism was useful. If the market could provide
services, there would be no need for regional approaches. Another element to that test was
that, if a national or local government could provide services well, regional bodies and
approaches might be set to a minimum.
Lastly, the sovereignty test determined whether
effective sovereignty was possible through national approaches. If not, the management of
services perhaps needed to be provided through regional bodies, although national
policymaking would be retained.
Regional groupings
Benefits
The main assumption was that it was more beneficial for small states to be engaged in RTAs,
because alone they had no real power in the global environment. The literature of this area
defined two main effects, static and dynamic.
What the former referred to was locative
efficiency, allocating the capacity available; whereas the latter meant increasing productive
capacity.
Dynamic effects should increase specialisation, exploit economies of scale,
stimulate investment, intensify competition and expand markets to create more efficiency.
Some authors believed that RTAs were good for small states because they brought credibility,
signalled coordination and supplied insurance and greater bargaining power. They were seen
sometimes as ‘safe havens’, sometimes as diplomatic strategies.
Pragmatism
A pragmatic political attitude was an approach available to all countries, regardless of size.
Therefore, Stefano Curto questioned whether small states were justified in relying more on
regional integration, with better international relations and fewer domestic policies.
It
seemed to make sense, in an ideal world, for small states to compromise their sovereignty a
little for the larger dividend that came from working together, and so he strongly
recommended adopting a pragmatic approach that would deliver a concrete solution for the
population’s needs.
Political economy
Critical to defining a pragmatic approach were the political economy and the capacity of a
government and economy. Over 50 years ago, a fully fledged European Union had not been
something that was being considered, but the successes of steel and coal agreements had
continued to be built on until the point had been reached today when the Union perhaps
needed to take a step back.
It was possibly not productive to continue using the EU as a
model.
Static effects
Rose Azzopardi sought to isolate the possible static and dynamic effects for Cyprus and Malta
in terms of economic integration. Static effects were relatively low, because both Cyprus and
Malta had signed an associative agreement in 1970 that lowered tariffs on many products. In
the manufacturing sector, tariffs had already been removed, but there was still some trade
creation in certain manufacturing and services because of this locative efficiency. The study
had found trade diversion in some sensitive agriculture and manufacturing sectors, but the
overall effects were negligible.
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Dynamic effects
To achieve dynamic effects there needed to be much more internal structural reforms on both
Malta and Cyprus. There was some evidence of increased competition and investment, but
this was mostly linked to the privatisation programmes engaged in after EU membership. As
this was insufficient to sustain the drive towards deeper integration, it was not known why
people really wanted to join the Union.
Additional benefits
Interest groups could affect international trade policy and, by extension, regional integration
agreements. Rose Azzopardi had conducted a qualitative analysis by holding interviews and
focus groups with employers, unions and government officials.
She had categorised her
results as follows.
A lock-in mechanism was the idea that countries had to make institutional reforms and
changes to abide by the existing policies in the region.
The EU was seen as a force for
change, especially in protected sectors, because of the need to meet goals like the Lisbon
Agenda and EU 2020. This induced high standards. The credibility issue could be seen on
both the international field, with rating agencies, and the local field. The euro had stabilised
the economic environment, especially for foreign investment, and the locals now held
governments accountable beyond their national representative to a higher ‘deity’ – the
supranational institutions of the European Commission and the European Court of Justice.
The big brother issue was one of protection. Small states could not deter insecurity, prevent
illegal migration or halt climate change on their own, but big brother would take care of that.
In the case of Cyprus, big brother would support their internal issue to resolve the island’s
divide. The key stakeholders saw the EU as offering a myriad of opportunities. It allowed
labour movement as a safety valve for high unemployment; it would induce more FDI, which
could help improve educational policy; and it facilitated business networking.
Theoretical aspects
The theoretical underpinning of regionalism could be examined through club theory. This had
been applied in various contexts, such as military alliances and international organisations.
People were already familiar with 40 years of regionalism as CARICOM.
were gatherings of like-minded groups.
Essentially, clubs
Their most basic requirements were to be
self-sustaining and provide a large pool of net benefits. Success was measured by whether a
club’s benefits exceeded its costs. In the Pacific, just as in the Caribbean or Indian Ocean,
the more remote islands entailed higher costs due to their isolation.
Sub-regionalism
There could be a tension between scale effects and the distance of collective action in a club
with varied geographies.
The composition of the optimal club varied depending on these
issues. In the Pacific context, the diseconomies of isolation were particularly high, so scale
benefits had to be large for a club to be sustainable. Regionalism was not applicable in every
context; sub-regional initiatives might be more viable in the Pacific, just as they had been for
the eastern Caribbean.
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Challenges
To understand why regionalism was important to the region, first it was necessary to
understand the significant challenges the region was facing, not all of which could be met
through national approaches alone. Many of these long-standing issues, but not all, were due
to smallness. They were structural and capacity issues.
Other concerns
A group of researchers from the University of Sussex had maintained that the effects of RTAs
were likely to be strong and deep, although 90% of RTAs were actually of the shallow form.
Over the past three decades, trade agreements had gone beyond border measures to effect
changes in domestic policies and regulations.
One study warned that inward-looking free
trade areas could actually inflict much more harm on economically small players.
Vested interests
Although phrased differently as ‘interest group theory’ by Rose Azzopardi and ‘club theory’ by
Sanjesh Naidu, both presenters had been referring to vested interests. The elites, whether
industrialist or mercantile, had an incentive to push for transnational or supranational
arrangements for various reasons, including self-interest.
Some of them preferred
protectionist policies and some sought the contrary, which made for an interesting political
agenda and an ongoing debate about political coalitions, intra-party rivalries or other groups
like employer or commercial organisations.
Competitive benefits
There was some room for regional and sub-regional work when competing.
The Eastern
Caribbean Telecommunications Authority (ECTEL) was a good example of a regulator for that
sub-region,
but
the
preconditions
needed
were
harmonised
policies
and
legislative
frameworks, convergence and the potential to enforce sub-regionally.
Competitive problems
Weak capacity and competition across small states to attract FDI could make it difficult for
them to work together. Such considerations had to be remembered in discussions of whether
to use domestic, regional or global relations to achieve policy goals. Capacity also dictated
the choice of instrument. ‘Capacity’ here meant the skills and abilities of government, and
the influence of the private sector and regulatory authorities.
Success for the larger
population ultimately depended on a combination of these attributes.
Trade
Regional integration efforts often started with trade in commodities and services. Historically,
the EU had been an example to all aspiring regions. This union had begun from trade in steel
and coal, whereas in the Pacific trade in goods and services was not being seriously
considered.
Some of these islands traded more with the US, whereas others looked to
Australia and New Zealand. Trade had been an engine for neither growth nor integration.
The Pacific had only instituted a trade agreement 10 years ago.
People were currently
working hard on a trade and services agreement too, but fundamental structural problems
like supply-side constraints were slowing that process. The world was now talking about aid
for trade and was re-engineering towards supporting suppliers more.
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Negotiations
The WTO often assumed that a small market size equalled a small market power, and
therefore less influence on rule- and decision-making. It was certainly correct that a small
market size was detrimental in the dispute settlement system. There was little purpose in a
small African state even putting forward a case when they had to retaliate against America
and had few tools with which to do that.
However, there were compensations for small
market powers in trade negotiations; many small African states were building and maintaining
coalitions. Amrita Narlikar had described coalitions in the WTO as being like a ‘spaghetti ball’,
because there were so many and, almost every month, a new one would appear that was
more significant than previous ones.
The WTO had contributed a lot of its resources to
important membership activities such as coalition-building, and this ought to be recognised.
Strategic coalitions
It could be argued that the WTO provided small states with more opportunities for influence
than the GATT system. There had been a quite remarkable reconfiguration of power within
global politics, specifically the emergence of Brazil, India and China in the WTO. This had led
to the development of some strategic coalitions, most notably the G20, Africa Group and
alignments between some of the smaller African states.
Vince Henderson recalled some of his own involvement with the ongoing Doha discussions.
He had found that, when there was no agreed position, the lack of agreement would lead to
parallel tracks of negotiation. In the Caribbean, several RTAs had emerged, some of which
were not even regional, such as the Economic Partnership Agreement (EPA), Africa, Caribbean
and Pacific Group of States (ACP) and CARIFORUM. At the same time, discussion on these
very important issues must continue to be pushed.
Reconfiguration of power
The WTO, as compared to the GATT, showed far more of a North-South dynamic. Perhaps it
was this that had deadlocked negotiations, because it allowed small African states to hold the
big states to account through discourse, because of this reconfiguration of power and because
of the system of consensus decision-making.
Failed attempts
The Pacific Island Countries Trade Agreement (PICTA) was supposed to have become effective
in 2011, but was still not in force.
Likewise, sub-regional efforts, either for Polynesian or
Melanesian integration, were also seeing delays.
Trade was happening between certain
commodities, but practices were still beset by deficits and disputes.
efforts were not unique, but mirrored in some ASEAN countries.
These half-hearted
The regional integration
efforts that had taken place in Europe occurred because of the threat of former Soviet
communism, but there was no such threat today, which was why members in the RTA group
were looking outside – for example India was looking for free trade with Thailand and
Sri Lanka, and Australia and New Zealand, at the Trans-Pacific Partnership (TPP).
In other
words, small countries were being left behind. Greater political will was required to prevent
island countries from having to depend upon themselves or their big brothers.
Regional maturity
Sanjesh Naidu perceived a direct link between regional maturity and sharing institutions. For
example, a region could not have a central bank until it had resolved many integration issues,
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such as regional cooperation and pooled services. The Pacific was working through a number
of issues related to cooperation and the delivery of services at the moment. While this was
ongoing, there was the possibility of providing support to struggling sub-regions while
allowing them to maintain their individual sovereign rights. The point was the region was not
yet mature enough to move towards that.
Horizontal or vertical relationships
Another
important
dimension
of
regionalist
issues
concerned
horizontal
or
vertical
relationships. Rose Azzopardi had primarily emphasised the advantages that a country like
Malta was seeking to gain through membership of a regional trade bloc like the EU, but their
rapport with Cyprus, where they were similarly positioned in relation to EU membership,
might bring about a stronger horizontal relationship too.
It would be interesting to see to
what extent Malta’s and Cyprus’s experiences with the EU could be translated into Caribbean
or Pacific contexts, with their own ongoing negotiations on the Economic Partnership
Agreement, for example.
Intra-regional cooperation
Steven Ratuva commented on inter-regional cooperation between the EU, Pacific and
Caribbean. A number of Caribbean and Pacific island states were members of the EU-ACP and
members of the EPA or Pacific Agreement on Closer Economic Relations (PACER Plus). As a
member of the EU, Malta’s political economy was very different from Caribbean or Pacific
countries.
Steven Ratuva asked whether the recent crisis in the EU was causing a new
conceptualisation of regional blocs, in terms of the sovereignty of individual states and how
they linked up to each other. The EU might no longer be the best model to follow.
Case studies
Pacific regionalism
Sanjesh Naidu highlighted the principles of Pacific regionalism as derived from club theory. It
was necessary to intervene regionally where there would be significant economies of scale in
order to ensure sustainability, or where the market could not provide goods or services, and
where there would be significant net benefits over national provision. Sub-regional options
sometimes made for optimal clubs. Specific initiatives were essential to ensure that services
would be provided to the smallest members of the region.
For example the micro-states
within the Pacific region would need more support than others, and perhaps targeted
subsidies. A number of mechanisms for Pacific regionalism had been used already, such as
regional cooperation and services supported through institutions like the Pacific Islands Forum
and the University of South Pacific. RTAs were in place as well.
With his Forum secretariat and the regional association of auditors-general, Sanjesh Naidu
had coordinated a governance initiative in regional auditing to show how Pacific regionalism
could be applied. He had partnered with the World Bank and regional aid organisations, who
were committed to this as a modality for supporting strengthened auditing services.
Essentially the programme was just regional support, but it was justified because of the
massive problems with public auditing in the region. Capacity-building alone was not helping,
because trained people would migrate to larger countries.
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Sub-regional Pacific approaches
There were sub-regional approaches for Nauru, Kiribati and Tuvalu, where a few people from
each of these countries were involved in supporting one auditor-general, who ultimately
approved all reports. Through this approach, heavily backlogged government accounts had
quickly been reconciled and some major audits had been completed.
For example, the
pension fund in Kiribati had not been audited for 10 years, but an audit had been done after
using this mechanism.
This was an example of capacity supplementation versus capacity
building. Other examples concerned labour mobility and remittances, but these were works in
progress.
New CARICOM initiatives
A recent CARICOM meeting had discussed new areas of cooperation within the region,
including common institutions such as a single stock exchange or joint supervision for
commercial banks. The Pacific island states could try to develop the same. It was uncertain
whether that would involve some loss of sovereignty or if it could somehow be maintained.
AOSIS
One member commented that the most successful model for small states in international
relations had been the Alliance of Small Island States (AOSIS), which had been formed in
1989 and had since been a leading voice in the negotiations on climate change.
Siva Palayathan agreed that the UN should be asked to review the work of AOSIS and
examine all the complexities of that system to learn what benefits it might bring.
Rio 2012
There were two major themes already included in the agenda for Rio 2012, the green
economy and international sustainable development architecture.
Critical issues for small
states were what type of institutional structure emerging from Rio 2012 would best represent
their interests and what the implications of that structure would be on WTO negotiations. The
WTO had been heavily influenced by what had happened at UNCED, the formation of AOSIS
and the negotiations on climate change, but it needed to be more closely aligned to the UN
system generally.
Malta and the EU
Since 2004, Malta’s level of merchandised trade with the EU had decreased, but other types
of investment and trade outside the EU had increased. Issues of credibility, dependence and
lock-in mechanisms still prevailed, but many of these were supportive of increased trade.
Mauritius
Donna Lee thought of Mauritius as ‘very promiscuous’ and strategic for the number of friends
it sought to have in the WTO, without limiting itself just to the Africa Group to G90. It was a
member of Non-Agricultural Market Access (NAMA), for example, and had led ACP for a while.
This strategy perhaps explained why Mauritius was more influential than some other smaller
states.
Practical suggestions
Framework
Leaders from the region had agreed to the Pacific Plan in 2005. It identified a framework for
Pacific regionalism that incorporated the elements test mentioned above, but this was work in
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progress. The plan provided an effective framework for engagement with foreign countries,
regional partners and non-state actors.
Regionalism offered an opportunity to tackle long-
standing structural problems. Key to it was reinforcing effective sovereignty. Best practice
from this example could be shared between existing small states regions in the Caribbean and
Indian Ocean.
Rose Azzopardi explained that her primary focus had been on a new
theoretical framework that would bring additional benefits to small states engaging in a bigger
entity, rather than static and dynamic effects specifically.
WTO agreements
The four administrative proposals accepted by the WTO, including Technical Barriers to Trade
(TBT) and Sanitary and Phytosanitary Measures (SPS), basically showed how to organise
within regional groupings, reduce costs and work collaboratively. Siva Palayathan personally
believed that there was value in the work that had been done and it should not be discarded.
Resources could be applied to advocacy work in the new international discourse, wherever
people were engaged – in climate change, migration, etc. Small island countries could apply
this learning process and technology to their home systems. This work could be reformatted
for use in FTAs, which had been proliferating recently.
Roadmap
The current WTO agenda was looking more at the impediments and conflicts with existing
Commonwealth Secretariat or World Band activities.
There needed to be a clear roadmap
showing how to strengthen training and capacity-building to ensure that all the necessary
results could be obtained from the various forums. The Barbados Programme of Action, for
example, was a treasure of an agenda for the needs and requirements of SIDS. The leading
hands of the World Bank and Commonwealth Secretariat were still needed to help engineer
this new roadmap.
Regional costs/benefits map
The next recommendation was to map countries’ choices for regional integration and
cooperation against their advantages and costs.
Regional cooperation
International relations and regional cooperation could be seen not so much as goals in
themselves but means to achieving objectives.
It was critical that small states recognised
what that objective was when choosing whether to engage domestically, sub-regionally,
regionally or globally.
Thus, they had to engage pragmatically with a governmental
configuration that allowed for a tailored approach.
In adopting this pragmatic attitude,
countries should think about building blocs or partnering with a region or institution.
Doha Round
included
components
harmonisation and also enforcement.
related
to
advocacy,
negotiation,
The
implementation,
A marriage to one specific counterpart might not be
beneficial to achieving objectives related to all those different aspects.
Synergy
As well as the Small States Forum, AOSIS and the WTO Small Vulnerable Economies
programme, there were other groups undertaking different regional initiatives. There should
be some assurance of synergy and overlap between them.
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Mitigating debt
Discussion on debt raised the question of the continuing viability of independent states. One
solution was for more rapid regional integration; another was peripheral dependence, such as
that of Réunion with France.
A third idea was to replicate the EU-ECOWAS (Economic
Community of West African States) solution of local multi-state development to overcome
problems of small size and fiscal viability.
Continuing discussion
Godfrey Baldacchino commented that a conversation between the reality of political
institutions and key actors on the ground, and the benefits they hoped to achieve through
regionalism initiatives, had to be maintained, at the same time looking at the bottom line and
seeing what mattered in terms of fiscal responsibility and making small countries more
sustainable.
Research suggestions
Malta and Cyprus
Economic integration was seen by Cyprus and Malta as another development strategy in
which they were engaged, whereas most small states tended to use the resources and
markets of others. More research was needed to try to determine other advantages from this
strategy and how best to exploit opportunities from this deeper integration process.
More
research was required into whether these results were applicable to other areas.
Further regional integration studies
Rose Azzopardi would be looking at Iceland next, which was a country that did not want to
join the EU but did want the euro. She hoped that others would be interested in studying
regional integration in other areas, and offered to reply to requests to share her
methodological tools and help make comparisons.
She also wanted to see research on
whether economic integration was a viable development strategy for all small states and how
best to exploit it.
Political economy
To implement more regionalism across small states, additional research was required into the
political economy issues underpinning it. As well as the regional audit service, Sanjesh Naidu
had learned some critical lessons from the example set by ECTEL.
It was necessary to
identify other areas where services would be better provided regionally as opposed to
nationally.
Other Creative Ideas
Relevant presentations
•
Roger Hosein looked at opportunities to diversify into medical tourism and teaching.
•
Rachel Onezime investigated whether teaching agriculture in primary schools in the
Seychelles improved quality of life and sustainable development.
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Medical tourism
Concept
In its broadest conceptualisation, medical tourism referred to travel with the express purpose
of obtaining health services.
It had been taking place for many years, but previously the
format was for people from developing countries to visit developed countries.
These
suggestions would reverse that flow.
Opportunities and scale
Medical tourism was now a billion-dollar industry for some countries, but was still a
developing area.
Although many countries in Southeast Asia were attempting to enter the
sector, the Caribbean was lagging behind.
At least two years ago, the World Bank had
observed that, although tourism was growing towards the $1 billion marker at around 4% or
5% per annum, medical tourism was growing at 30%.
Offshore universities, following the
examples of St George’s in Grenada and UMHS in St Kitts, seemed to have great potential.
12 million medical tourists were expected to leave the US next year; 120 million Americans
lacked dental care and 60 million were without medical insurance. A 2007 Deloitte study had
indicated that 750,000 Americans travelled abroad for treatment, mainly elective surgery. In
2012, that figures was projected to be 12,660,000, and 22,090,000 by 2016, which would
amount to an expenditure of about $80 billion a year. The Caribbean must be able to tap into
this market.
St Kitts, Suriname, Costa Rica and Barbados had programmes underway
already, but there was more to be done. These tourists fitted a similar trend elsewhere for
low-volume high-value tourism.
The medical tourism opportunity in Trinidad and Tobago
The growth of this form of tourism could lead to the development of new resorts that were
conducive to recuperation and rejuvenation, present new possibilities for the employment of
highly skilled and specialised health professionals locally and bring back some of the health
professionals who had migrated.
It must be part of a move to diversify over-specialised
small-island economies away from natural resources, and sun, sand and sea tourism.
Industrialisation by invitation
Roger Hosein invoked the work of Nobel Laureate Sir Arthur Lewis and his call to industrialise
by invitation and thus diversify the economy of Trinidad and Tobago.
The centre of this
philosophy was that industrialisation must begin with the market. Americans, Canadians and
Europeans were travelling abroad for value, which equated to quality, affordability and
accessibility. They were travelling to make savings, so treatment had to be significantly less
expensive than in their home country and the quality must be equal or higher.
They also
required transparency in pricing and preferred English-speaking clinics and hospitals, and
safety in their destination country.
Some popular surgical procedures included orthopaedic treatment, heart procedures,
transplants, dental treatment, cosmetic surgery and IVF. Existent arrangements pointed to
the possibility of more meaningful participation in this sector by small Caribbean states by
using Lewis’s industrialisation-by-invitation strategy.
These types of industries could be
established by encouraging large foreign multinationals with established brands to set up
shop in a small state.
Trinidad and Tobago had successfully pursued that strategy in the
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petroleum sector, where it had become the world’s top exporter of methanol, urea and
ammonia.
US interest
US hospitals were also very interested in securing some proportion of medical tourism by
offering procedures at overseas hospitals.
The University of Miami Miller School, the
International Medicine Institute and Johns Hopkins University were already involved.
Challenges
The Wockhardt Hospital Group in India had been attracting a lot of medical specialists from
the US and elsewhere to come back home, work, and obtain international accreditation and
branch plant partners. There was a private hospital association in Trinidad and Tobago that
could form a public-private partnership with the Ministry of Health and the Ministry of Tourism
specifically to design an appropriate marketing strategy to target certain types of care in
private sector hospitals. There was also a need to work with actual hotels and to properly
regulate the sector.
There was a political dimension in ensuring local access to healthcare
was not compromised, and a strategy was also required for follow-up procedures.
Dangers
Medical tourism could be ethically dangerous, and countries also risked losing some of their
most highly skilled workers.
Domestic legislation and supplier skills would have to be
examined. People from the diaspora could be used if necessary. This would certainly affect
costs, but Trinidad and Tobago had a hospital and a teaching university, which produced
medical graduates and specialists too, so many skills could be supplied in-house. However,
one attendee found all the talk about medical tourism surprising when some countries were
failing to meet basic health standards.
They had problems with food and water security,
sanitation, shelter and health, and needed good economic governance without corruption.
Economic assumptions
Roger Hosein’s paper was presented as a new industrialisation-by-invitation strategy.
The
presumption could not be of unskilled labour in the health sector in the Caribbean, because
this was contradicted by the high out-migration rates of skilled personnel. For this model to
be successful, it needed a way to prevent trained people from leaving. There was also the
major question of where the money would come from, although it could come from
international partnerships.
There was an additional worry of forming two-tier health sectors in destination countries, as
private sector staff would have to be paid more than their public sector equivalents.
The
concern was how these healthcare enclaves would be sustained. India was seeing success in
medical tourism because it had a stock of skilled people able to deliver at low costs.
The
situation might not be the same in Trinidad and Tobago. Roger Hosein accepted that some
sectoral disparities might arise, but was reassured by the initial experiment Trinidad and
Tobago had made into the petrochemicals sector.
Case studies
St Kitts had started construction on an 18-bed surgical hospital to be known as the St Kitts
American University. This was a joint venture between the American Hospital Management
Company and the Royal St Kitts Beach Resort Limited – a local and foreign entity had teamed
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up to expand a hotel resort with a medical tourism appendage. Likewise Guyana had secured
a credit line of $18 million from India to build a hospital to conduct procedures such as organ
transplants and cosmetic surgeries for tourists looking for inexpensive medical care abroad.
The Indian company would build the hospital for Indian medical specialists to operate it.
Similarly, in Suriname, the L Mungra Resort Hospital had opened a kidney dialysis centre
using resources from the Netherlands. This facility was intended to cater both for people from
Guyana and from the Netherlands.
Some rough data showed that, in the US, heart bypass operations cost about $133,000. The
Caribbean benchmark was $9,000. In West Shore Hospital in Trinidad, this procedure cost
$24,500. In Costa Rica, it was $24,000. Costa Rica had carved a niche and was doing well in
medical tourism today. A knee replacement in the USA was $40,000, whereas it was $8,500
in India. Trinidad and Tobago was not too far behind at $10,000. Hip replacement in the
USA was $43,000. This was $9,600 in Trinidad and Tobago and $7,100 in India.
Roger Hosein had cited Guyana and Suriname, but Cuba perhaps offered a better example of
medical tourism practice, with the institutional framework that had been put in place there.
Cuba was the Caribbean’s flagship medical tourism destination, although not a member of
CARICOM. People visited from all over the world to obtain medical services there, because of
its conducive environment and stable governance structure. That model could be replicated
in other parts of the region.
Practical suggestions
Tobago had suffered very badly from a fall in standard tourism from about 80,000 in 2006 to
31,000 in 2010. Of the two islands, Tobago had the scenery, greenery and beautiful beaches.
It seemed better suited than Trinidad to medical tourism.
The Scarborough Hospital in
Tobago had recently been completed, so maybe the government should consider instituting
some form of teaching or training at that hospital to extend into medical tourism.
A World Bank study in 2008 had identified that St George’s University in Grenada generated
25% of that country’s GDP. Maybe the time had come for Tobago to be the location of two
large offshore universities producing for the foreign market. The country spoke English, was
safe and relatively crime-free.
It came with a long history of tourism and already had an
infrastructure in place. It could target ageing visitors from the rising BRIC economies.
There was a need to start focusing on building export capacity after supplying domestic
markets, particularly in small states. Only a few exceptions were likely to be able to offer
that capacity innately, so maybe they should offer a subset of medical services – health and
wellness – that fitted well with their culinary and environmental attractions.
Research suggestions
Research should aim to determine an operational plan that would capitalise on people
travelling to obtain health services.
This would include trade agreements, technology and
innovation. To be cost-competitive in medical tourism, it was necessary to have mechanisms
that allowed for the portability of insurance and a high quality of care.
This required
demographical analysis of key target markets, including the Caribbean diaspora. It was also
necessary to pinpoint niche areas where different regions could establish top-notch medical
centres.
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Jennifer Jones desired an operational plan that would competitively position the Caribbean to
capitalise on the flows of people travelling to obtain health services. Although he conceded
that the ideas and rationale were laid out convincingly, Tihomir Stucka argued that a more
in-depth analysis of the established competition in the medical tourism business could
highlight some barriers to entry or possibly strengthen the case for diversification.
Teaching agriculture in primary schools in the Seychelles
Overview
Research had been carried out in 19 primary schools in Mahé, where agriculture was taught
as an optional component of the Technology and Enterprise curriculum.
It was currently
argued in this country that children needed to learn more about gardening, food production
and consumption, and healthy eating. Agriculture was considered one of the main elements
needed to improve quality of life, as stated by the World Commission on Environment and
Development in 1987.
The idea to promote agriculture and sustainable development had
been adopted as part of Agenda 21 at the 1992 Earth Summit.
Objectives
Other than the primary aims stated above, this project also sought to suggest ways in which
the teaching of agriculture and sustainable development could be promoted in schools and to
evaluate the contention that agriculture was not actually that important. Both qualitative and
quantitative data had been collected through questionnaires, interviews and diary-keeping.
Findings
The research showed that agriculture had an important role in helping people develop better
problem-solving skills and manipulative skills. It also had an influence on their career choices
in the future, and could help in the long-term social and economic development of the
country.
It could also encourage future generations to maintain a tradition of backyard
gardening, and educate the younger generation in environmentally friendly farming practices.
Another long-term benefit was its contribution to food security.
The Seychelles imported
more than 90% of its consumable products, but agriculture lessons could still contribute
towards some improved self-sufficiency.
John Connell remarked that the most important
element of a sustainable green economy was achieving and sustaining food and water
security, but a shorter-term policy that might help would be to revitalise agriculture in the
Seychelles.
General research resources
•
Sudarshan Gooptu referred participants to a recent publication, Small States, Smart
Solutions.
•
Lino Briguglio had written a book on how to build a small state economy that was
structurally resilient.
•
Saving Small Island Developing States incorporated work that looked at the
middle-income trap to maximise state income, and some of the concepts around
vulnerability and resilience, focusing on trade and institutional development.
It
highlighted the biocapacity deficit and the externalities of economic growth.
•
Godfrey Baldacchino referred participants to a forthcoming paper in Asia Pacific
Viewpoint about how to ride multiple economic waves.
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Research funded by the International Development Research Centre (IDRC) focused on
migration opportunities in two main sectors – brain circulation and diasporic tourism.
It also looked at the health sector, science, technology and innovation, financial
services and telecoms.
•
Terra Sprague had made available a summary of her research into education in small
states.
•
Naren Prasad had summarised the main findings of his research into social policy in
small states, and offered to make this available to participants.
•
The technical approach and quantitative work behind Tihomir Stucka’s project on trust
funds in Pacific island states was available in greater detail.
•
Rose Azzopardi’s regional analysis into integration agreements and the role of RTAs in
small states was available in greater detail.
•
Sanjesh Naidu recommended some work available on the Pacific Island Forum’s
website on regionalist approaches.
This included pre-feasibility studies on having a
single financial supervisor for the region, a financial ombudsman and a customs
controller.
•
The World Bank’s Doing Business publication ranked countries according to several
indicators of business success, and made suggestions for ways to harness investment
opportunities.
•
Donna Lee’s paper provided some more details on the significant investments small
African states were making in Geneva Missions.
•
Wong Poh Poh reflected that none of the presenters had directly asked the people who
lived in small states what they considered to be their country’s greatest achievements
and failures. Their leaders might also be interviewed, and their biographies studied, to
gain some insights that might then be used to tweak policies.
•
Sudarshan Gooptu hoped that this expert group would continue working together in
developing their analyses.
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