Background

Economic Vulnerability

Small states have a number of inherent features which render them very exposed to external economic shocks. This reality, which has been termed “economic vulnerability”, arises from the fact that the economies of small states are, to a very large extent, shaped by forces outside their control, mostly due to their high degrees of economic openness and export concentration, and high dependence on strategic imports.

Although economic vulnerability poses serious development constraints, many small states have taken steps to build their economic resilience in order to cope with and withstand their inherent vulnerability. The need for resilience building in small island developing states (SIDS) has been given centre stage at the “Mauritius Strategy for the Further Implementation of the Barbados Programme of Action”, which was adopted by the International Community in January 2005.

Economic Resilience

The term “economic resilience” has been used to refer to a country’s ability to cope with its inherent economic vulnerability. In this sense, resilience may be inherent or nurtured. The inherent aspect of resilience may be considered as the obverse of vulnerability, in the sense that inherently vulnerable countries would also lack inherent resilience. Nurtured resilience on the other hand, is that which can be developed and managed, often as a result of deliberate policy.

In recent years, there has been considerable debate on the issue of building resilience in small states. This issue is important because it carries the message that these states should not be complacent in the face of their inherent vulnerability. In other words they should take measures, possibly supported by the international community, to strengthen their economic, environmental and social resilience. In addition, the discussion on resilience sheds light as to why a number of vulnerable small states have managed to achieve a notable level of economic development in spite of their economic vulnerability, a reality which has been referred to as the “Singapore Paradox”.

Measuring Economic Resilience

There have been various attempts at measuring economic vulnerability. The vulnerability indices produced so far, including those developed by the University of Malta, the Commonwealth Secretariat, and the United Nations Committee for Development Policy, generally come to the conclusion that small island developing states, as a group, tend to be more economically vulnerable than other groups of countries.

Recently, there have been calls for creating a resilience index, to complement the vulnerability index. The participants at the Mauritius International Meeting held in January 2005 called for the establishment of a Task Force to develop such an index (Paragraph 81 of the Mauritius Strategy). The emphasis of the Mauritius International Meeting was on resilience building, and the index should therefore relate to policies which render the country better able to cope with its inherent vulnerabilities.

The University of Malta is proposing a method by which a resilience index can be constructed so as to support decision making with regard to resilience building (click here to retrieve paper). The index could serve to monitor and evaluate developments in resilience building and provide quantitative estimates in this regard. In addition the index could be useful in setting targets and establish benchmarks. The index could therefore serve, amongst other things, as a guide for good practice, so that the successful policies adopted by some small states could be emulated by others. It could also serve as an indicator as to what a country has done or needs to do to enhance its economic resilience.