This rapid literature review explores whether there are specific characteristics of Small Island Developing States (SIDS), or a subgroup of SIDS, which mean that income alone is an inaccurate measure of development.
The SIDS classification is a technical and political term used to identify those countries that are considered to face specific and increasing challenges due to their geographic characteristics,
remoteness, small landmass, small populations, small size of economy, high exposure to external environmental and economic shocks, and due to the climate crisis (World Bank, 2016; OECD, 2018). The SIDS classification began to gain currency in 1992, at the United Nations Rio Conference on Environment and Development, when it was used to identify and draw attention to the SIDS’ environmental and developmental commonalities and challenges. There is no agreed definition of SIDS. Depending on the criteria and/or list used to define SIDS, the list of countries
that qualify range from 29 countries to 52 countries (using the criteria of the UN Conference on Trade and Development (UNCTAD), or the United Nations Office of the High Representative for
the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), respectfully) (OECD, 2018).
Key characteristics of SIDS include:
Heterogeneity – The SIDS are a heterogeneous group of countries, spread across the world, with very distinct, and context-specific, needs, opportunities and challenges. Development indicators (like income) can disguise the unique challenges faced by different SIDS. As the development trajectories of developing countries widen, heterogeneity is increasing across all developing countries. The heterogeneity of the SIDS group may also be exacerbated by the lack of agreement on the SIDS criteria, and as members of the SIDS group is largely by self-appointment.
This rapid literature review is not able to judge whether the SIDS’ commonalities are more important than their differences, and this is not a focus of the literature, however, the OECD (2018) does state that the differences among SIDS “point to the need for tailored development approaches across the group”, yet the common challenges they face mean there is “scope for mutual learning”. The SIDS are often discussed in their regional subgroups – e.g. the Pacific SIDS, the Caribbean SIDS. This rapid literature review did not find other SIDS subgroups that were the subject of extensive focus. However, Alonso, Cortez and Klasen (2014) suggest that it would be beneficial to create some smaller SIDS subgroups along with issues-based categorisation.
Small country size and remotely located from markets – A defining characteristic of SIDS is that most have small population sizes, and territories that are remotely located from economic
markets, and whose people are often diffusely located within.
Lower economies of scale and higher costs for the provision of state services – Small, dispersed populations mean that domestic markets are small, and state capacity is limited, thus limiting economies of scale. Remoteness from markets leads to “high production and trading costs, limiting investment, competitiveness and the scope for integrating global value chains”
Economic vulnerabilities or economic success? – Some of the most commonly identified characteristics of SIDS are their economic vulnerabilities. However, small island states also
succeed economically – perhaps due to the resourcefulness of the islanders, or due to governance measures enacted by policymakers to mitigate against its vulnerabilities.
Economic vulnerability analysis tends to be based on inherent conditions affecting a country’s exposure to exogenous shocks, while economic resilience analysis draws on analysis of the actions taken by policymakers and economic actors to manage shocks (Briguglio, 2003, 2004).
Economic openness – In general, SIDS are more open to trade than other developing countries. This openness makes the SIDS particularly vulnerable to external economic conditions, of which
they have no direct control. However, most SIDS are currently excluded from the global economy due to their smallness.
Lack of economic diversification – Most SIDS have narrowly based economies that depend on just a few products and sectors. Some SIDS are dependent on strategic imports – e.g. energy,
fuel, food, and industrial supplies. Common growth sectors include natural resources and tourism.
Slow and volatile economic growth – While most SIDS’ GDP compares relatively well to other developing countries, economic growth in most SIDS tends to be “fairly sluggish” (OECD, 2018).
Environmental vulnerability – SIDS is the most environmental vulnerability of all developing countries. The climate crisis is making natural disasters more intense, and this looks set to
continue. While SIDS are located in some of the world’s most disaster-prone regions (OECD, 2018), natural hazards do not always cause disasters. The concept of vulnerability combines the
likely physical impacts of the hazard (vulnerability), with the ability to manage or adapt to that event/change (resilience).
Climate vulnerabilities – SIDS are particularly vulnerable to the climate crisis, and will continue to be among the earliest and most impacted countries. Many SIDS are vulnerable to sea-level
rises and storms due to being low-lying. Some SIDS’ economies are dependent on one of the following sectors: public sector employment, agriculture, fishing and tourism. These sectors are
often particularly hard hit by climate change. To measure and track climate vulnerability, indices include: The ND-GAIN Country Index; The CGD “Vulnerability to Climate Change Index; The
Climate Change Impact rankings; and The Climate Vulnerability Monitor.
Human development lags? – There is mixed evidence on the state of human development in the SIDS. Some shows that human development indicators in SIDS lag behind other developing
countries while others find it to be higher yet also that long-term progress by the SIDs is relatively low compared to other groups.
Is income alone an inadequate measure for development in SIDS?
This rapid literature cannot categorically answer whether income alone an inadequate measure for development in SIDS. Income is not typically a focus in the literature in SIDS, perhaps as the
SIDS group is highly heterogeneous in terms of income.
Income indicators are the most common indicators used to measure and categorise development needs across all developing countries, and often also to allocate aid and rights to loan concessions. One of the benefits of using income is that it is an easily available and standardised indicator. Yet using income as a proxy for development has many caveats and challenges – e.g. it does not factor in vulnerability, it does not reflect inequalities in income distribution, etc. More broadly, income indicators measure income, and it is widely agreed that development is broader than just income. For this reason, and given the limitations and challenges around using just income indicators, income indicators are usually combined with other indicators to make assessments on development, and to make subsequent policy decisions on whether the country should receive aid or concessions.
SIDS do have some specific characteristics and needs (as above), and many of these differ from other developing country groupings. Yet ultimately, the decision on whether the SIDS are more
worthy of aid or concessions than a non-SID developing country, or country group (with their own specific development needs) is a qualitative judgement, and it is challenging to set a standard
criteria to hold across all developing countries.
This review found some studies which explicitly state that income is an inadequate indicator for measuring development in SIDS (e.g. Bourne, et al., 2015, p.9). However, the literature on SIDS
more commonly focuses on the SIDS’ specific needs and characteristics, rather than focussing on their income status. Yet despite the lack of focus in the literature, the conclusion that income
is an inadequate indicator for measuring development in SIDS could be inferred from the widespread identification of the SIDS as having specific development needs; the development of
specific indexes to measure vulnerability; the political focus on raising attention to the SIDS’ needs; and the increased risks, and knowledge of the risks, from the climate crisis to SIDS.
Challenges of using indicators to measure development needs
A key limitation for understanding development levels in SIDS is the lack of data. Alonso, et al., (2014) suggest that instead of the broad “all-purpose” SIDS category, it would be beneficial to
create some smaller subgroups along with issues-based categorisation. Ultimately, while identifying specific characteristics and indictors for development has a technical side, politics plays a critical
role in what is considered the development and need
Studies on SIDS have proliferated during the past three decades (Briguglio, 2018b). The literature base is largely made up of papers from international organisations and indices from think tanks. The indicators developed within these indices draw on academic papers, particularly using econometric methods.