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Social Policy in the Post-crisis Context of Small Island Developing States: a Synthesis

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This paper provides a synthesis of the multifaceted impact of the global economic crisis on Small Island Developing States (SIDS), focusing on the Pacific and Caribbean regions. It shows that the social investment agenda, which has underpinned so much of the development progress of SIDS, has been particularly challenged by the global economic crisis and will require innovations and policy changes by SIDS in order to sustain and advance beyond current achievements. Global action will be required to enhance the available fiscal space for these actions. Additionally, in the SIDS, particular attention needs to be paid to the design and implementation of social policies that reduce vulnerability, improve resilience to exogenous shocks, and thus lower the human and productivity costs of exposure to repeated shocks. These include high unemployment and underemployment, rising crime and persistent inequalities across income groups and between rural and urban communities. The transitive effects of such exogenous shocks on the incomes, food security and access to basic public goods of poor and vulnerable households demonstrate the need for a new policy approach, one that is better placed than current approaches to increase SIDS? resilience to future shocks. The synthesis, based largely on experiences of and lessons learned from five countries in the Pacific and five in the Caribbean, seeks to advocate a ?paradigm shift? in global and national-level approaches to the development challenges facing SIDS.
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July, 2010
Working Paper number 67
Leisa Perch
International Policy Centre for Inclusive Growth
Rathin Roy
International Policy Centre for Inclusive Growth
SOCIAL POLICY IN THE POST-CRISIS
CONTEXT OF SMALL ISLAND
DEVELOPING STATES:
A SYNTHESIS
International
Centre
for Inclusive Growth
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United Nations Development Programme
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SOCIAL POLICY IN THE POST-CRISIS CONTEXT OF SMALL
ISLAND DEVELOPING STATES: A SYNTHESIS*
Leisa Perch** and Rathin Roy**
1 INTRODUCTION
This paper provides a synthesis of the multifaceted impact of the global economic crisis on
Small Island Developing States (SIDS), focusing on the Pacific and Caribbean regions. It shows
that the social investment agenda, which has underpinned so much of the development
progress of SIDS, has been particularly challenged by the global economic crisis and will
require innovations and policy changes by SIDS in order to sustain and advance beyond
current achievements. Global action will be required to enhance the available fiscal space for
these actions. Additionally, in the SIDS, particular attention needs to be paid to the design and
implementation of social policies that reduce vulnerability, improve resilience to exogenous
shocks, and thus lower the human and productivity costs of exposure to repeated shocks.
These include high unemployment and underemployment, rising crime and persistent
inequalities across income groups and between rural and urban communities. The transitive
effects of such exogenous shocks on the incomes, food security and access to basic public
goods of poor and vulnerable households demonstrate the need for a new policy approach,
one that is better placed than current approaches to increase SIDS’ resilience to future shocks.
The synthesis, based largely on experiences of and lessons learned from five countries in the
Pacific and five in the Caribbean,1 seeks to advocate a “paradigm shift” in global and national-
level approaches to the development challenges facing SIDS.
2 SIDS IN THE GLOBAL CONTEXT
SIDS first received global attention as a minilateral group in the mid 1990s, when the first
international conference was held in Barbados to focus on their particular development
* The authors thank the UNDP Pacific Centre and the Bureau for Asia and the Pacific of UNDP for the opportunity to
contribute to the conference on the global economic crisis in the Pacific region on 10–12 February 2010 with an earlier
version of this paper, which was targeted at the Pacific region. They thank the UNDP subregional office for Barbados and the
OECS, and the Resident Representative Ms. Michelle Gyles-McDonnough, who facilitated access to the draft economic crisis
PSIAs completed for that region in late December 2009, and for her inputs on the Caribbean. They are grateful to Carol Flore
and David Abbott of the UNDP Pacific Centre for their guidance and inputs on the Pacific. They thank colleagues at IPC-IG,
especially Paula Nonaka, Associate Researcher. The authors extend their appreciation to the writers of three reports prepared
under a UNRISD project on small states, which were highly informative in our considerations of a post-crisis policy agenda
and approach. Drs. Desmond Amosa, Biman Prasad and Geoff Bertram readily allowed us to cite their respective papers
while they were being finalised for public distribution in early 2010, when this paper was being drafted.
** International Policy Centre for Inclusive Growth.
2 International Policy Centre for Inclusive Growth
challenges. The outcome was the Barbados Plan of Action for the Sustainable Development of
Small Island Developing States. The most recent global strategic document on SIDS is the
Mauritius Strategy for the Further Implementation of the Programme of Action for the
Sustainable Development of SIDS. The theme underlying both these strategies is that small
islands share characteristics that make them economically, environmentally and socially
vulnerable to external shocks over which they exercise little or no control, a circumstance that
places them at a distinct disadvantage.2 Hence, the metric by which these states are viewed
within the development community and in international negotiations needs to take account
of these characteristics. The strategies in both documents detail how this may be done.
The special circumstances of SIDS have also been recognised in different ways by the
international community, most significantly the United Nations system. The United Nations has
established a SIDS unit in the United Nations Department of Economic and Social Affairs (UNDESA),
and also facilitates reporting on and monitoring of the Barbados Plan of Action. The United Nations
General Assembly reviews the SIDS Plan of Action every five years. A network to support the SIDS
was also established to facilitate dialogue on and advocate for SIDS issues. SIDSNET3 was
supported by the Alliance of Small Islands States (AOSIS)4 and through UNDESA. SIDS issues are
now addressed by the UN Office of the High Representative for the Least Developed Countries,
Landlocked Developing Countries and Small Island Developing States (OHRLLS).
A specific category of consideration has been provided for SIDS in the Global Environment
Facility, and since 1985 the World Bank has maintained a "small island exception" in its policy
of eligibility for concessionary treatment by the International Development Association (IDA).
In the World Trade Organisation (WTO), proposals for special treatment modalities of interest
to SIDS have been considered under a "Work Programme on Small Economies" since 2002.
Except for Barbados and Fiji, the 10 countries covered by this paper have economies whose
GDP stands at US$ 0.5 billion or less annually (Wikipedia, 2010, from IMF, 2009).
It can therefore be concluded that, to some extent, SIDS have been recognised and
accepted as a development typology within the global development framework. By the end of
2007, SIDS were receiving about US$ 1.8 billion a year in official development assistance, and it
was recognised that much more was needed (OHRLLS, 2007). Recent developments in the
international negotiations on climate change, however, point to remaining concerns that the
specific issues and challenges of SIDS are still being marginalised relative to other interests.
Initially, environmental issues dominated much of the discourse on SIDS as the threat of
climate variability and change became high points of the global agenda. More recently, the
social vulnerability of SIDS and social policy in small states have attracted increasing attention.
The United Nations Research Institute for Social Development (UNRISD), with the
Commonwealth Secretariat and the United Nations Children’s Fund (UNICEF), commissioned
several forward-thinking papers in 2009 on social policy in small states; the recent economic
and social survey on Asia and the Pacific by the UN Economic Commission for Asia and the
Pacific (ESCAP) also brings many SIDS issues into sharp focus, including that of resilience
(ESCAP, 2009). As the North begins to emerge from one of the worse economic crises in recent
history, the experiences, challenges and successes of SIDS in responding to this exogenous
challenge are receiving deserved attention.
At the time of writing, the need for SIDS to find ways to prepare for and withstand
multiple shocks becomes clear, as we witness the aftermath of an earthquake on already
ravaged Haiti. The Haiti experience is one of unanticipated events, but also illustrates an
Working Paper 3
inability to respond to recommendations of potential high-level risk. A stronger earthquake in
Chile a few months later caused significantly less devastation because of the resilience of
systems and infrastructure. Haiti’s experience brings to the forefront the harsh reality of the
multiplier effect of crises, each of which weaken a system to a point of devastation. The 12
January 2010 earthquake in Haiti followed the battering of the country by four storms in
September 2008, as well as other political and economic crises. As a writer in Time magazine
(Elliott, 2010) noted on 14 January: “a nation that was already on its knees had been knocked
to the ground.”
3 OBSERVABLE AND IMPLIED DEVELOPMENT IMPACTS OF RECENT
GLOBAL SHOCKS ON THE SIDS
There is little doubt that by the onset of the global financial crisis in late 2007 and its extension
into 2008–2009, most SIDS had experienced a “perfect storm” of crises that posed critical
challenges to their capacity to sustain progress in growth and human development. By 2008,
SIDS in general were faced with the combined onslaught of the following phenomena:
an underlying energy crisis that escalated energy costs, with additional
implications for the competing interests of using land resources for food
production and biofuels;
rapid climate change and intense climate variability (active cyclone and
hurricane seasons in 2007 and 2008; earthquakes; a tsunami in 2009);
the global financial crisis, resulting in job losses, home equity declines,
foreclosures, inflated commodity prices, a tightening of credit, a downturn in
markets and lack of confidence; and
a food crisis as global food security came under threat from high commodity
prices, drought and other issues.
MONOCULTURAL ECONOMIES AND MONOPSONISTIC DEMAND
Individually, any of these crises in any country would pose challenges to economic growth
and human development. In the SIDS the impact is all the more pronounced because of the
typically monocultural nature of their economies. This monoculturalism is accentuated by a
monopsonistic and highly elastic demand for the products of SIDS from a few rich countries.
When a global crisis occurs, therefore, SIDS have very limited policy space to manoeuvre;
domestic policies are of limited effectiveness in these circumstances. Smaller and less weighty
than their trading partners, SIDS lack adequate voice to negotiate individually when demand
falls. Six of the 10 countries covered in this paper are among the 10 smallest economies in the
world (measured by GDP), according to GDP figures for 2009 from the International Monetary
Fund (IMF) (Wikipedia, 2010). Addressing resilience would allow SIDS to channel aid towards
long-term and fundamental development challenges rather than into crisis management,
recovery and economic survival. Table1furtherillustratesthelevelofthisdependence,which
increasesSIDS’exposuretosmallandlargeshiftsandshocks.
4 International Policy Centre for Inclusive Growth
TABLE 1
Economic Dependency in Selected SIDS
Country Sectors contributing more
than 10% of GDP Sectors contributing
more than 30% of GDP Sectors contributing more
than 50% of GDP
Antigua and Barbuda Construction, banking and
insurance, government services - -
Barbados Tourism, wholesale and retail,
government services - Combined services as a whole
Dominica Agriculture, wholesale, bank
and insurance - -
Fiji Tourism, sugar, agriculture,
industry, government services - -
Kiribati Subsistence agriculture and
fishing Government services- -
Montserrat Construction, banks and
insurance Government services -
Samoa Industry, agriculture and
fisheries Government services Services (2005)
Solomon Islands Agriculture, fishing and forestry Government services Services (2006)
St. Kitts and Nevis Government services, banking
and insurance, construction - -
Vanuatu Banking and financial services,
tourism - Services
FREQUENT WEATHER/CLIMATE-RELATED SHOCKS
The frequency of adverse climate shocks compounds the problem of a monocultural economic
structure; this is well known and needs little elaboration. For example, Samoa’s experience of
the global economic crisis has doubtless been magnified by the impact of the 2009 tsunami
that created losses equivalent to 25 per cent of GDP (IMF, 2009a). At the time of the crisis,
Dominica was just emerging from the impact of Hurricane Dean in August 2007, which caused
extensive damage to the island, estimated at 20 per cent of GDP, and harmed or destroyed a
large share of the country’s buildings. This was in addition to heavy losses in agricultural crops
and a 40 per cent drop in banana exports in 2007 (Junge, 2009a).
The 2004 hurricane season in the Caribbean exemplifies the broad impact of natural
events across a region. The UN Economic Commission for Latin America and the Caribbean
(ECLAC) estimated the economic losses of that season at US$ 37.5 billion (including Cuba and
Florida); this is more than the annual GDP of many islands in the Caribbean. Without Cuba and
Florida, the damage still exceeds US$ 6 billion in one hurricane season (ECLAC 2005: 41). To put
this in perspective, IMF estimates of the 2009 nominal GDP for the 10 SIDS covered by this
paper suggest a combined total GDP of US$ 10.732 billion. In one year, the relative loss was
equivalent to the economies of nine (small) member states.
HOUSEHOLD INCOME
Income impacts have been felt across all countries affected by the crisis, among the poor and
non-poor. Income declines in the SIDS have been sharpest among those working in the
informal sector; the self-employed working in tourism or at companies or in jobs linked to the
tourist sector; migrants and immigrants; and those who rely heavily on remittances to meet
their basic needs. Unemployment in the five Caribbean countries considered in this paper
ranges from a low of 4 per cent in Antigua and Barbuda (based on 2006 figures) to a high of
13.0 per cent in Montserrat.
Working Paper 5
The regional unemployment rate in South-East Asia and the Pacific is estimated to have
risen to 5.6 per cent in 2009, up 0.2 percentage points from 2007 (ILO, 2009). Young people are
far more likely than adults to be unemployed: the region’s youth unemployment rate reached
15.3 per cent in 2009, against 3.4 per cent for adults, and hence opportunities for them, to ease
the income-expenditure deficit at the household level caused by the crisis, are almost non-
existent. Even before the crisis, young workers in the Pacific and the Caribbean already faced
substantial difficulties in securing decent and productive jobs. This puts additional strain on
those household members who have jobs, and potentially exposes youth to vulnerable
employment and other sources of income in their desperation to support families.
Although no household-level figures on income reduction are yet available, the existing
data give insights as to the level and depth of potential impacts. The 2009 Analytical Report on
the Kiribati household income and expenditure survey (HIES) noted that the economic crisis is
likely to result in a 10 per cent rise in the basic-needs poverty line (BNPL) and will probably
move an additional 5 per cent of households and population below the BNPL. The 2006 survey
revealed that, on average, every household in Kiribati spent at least US$ 1,600 more than they
earned every year, equivalent to around US$ 60 every two weeks (Kiribati National Statistics
Office, 2006: 22). Before the onset of the global financial crisis, the cost of living in Barbados
increased by an average of 5.8 per cent between 2005 and 2007, compared with an average of
1.1 per cent between 2002 and 2004.5 As the global economic crisis directly affected food
prices, employment and remittances, this income deficit likely deepened.
NATIONAL INCOME, REVENUE-GENERATION AND FISCAL SPACE
The sectors highly exposed to the crisis have been those clearly dependent on external forces.
In the Caribbean, about 50 per cent of banks are foreign-owned, especially by Canadian banks,
a circumstance that brought a certain level of exposure to the first stage of the crisis (CDB, 2008).
Despite positive aggregate growth across the Asia-Pacific region, as shown in Table 2,
Samoa, Fiji and the Solomon Islands in particular have suffered negative effects. Specific
impacts have included:
the devaluation of the Fiji Islands dollar, which is expected to add to inflationary
pressures in the Fiji Islands (Jayaraman, 2009);
the decline of the market value of the Revenue Equalisation Reserve Fund in
Kiribati by 20 per cent in 2008. The country’s main source of budget financing was
affected as withdrawals were necessary to cover the budget deficit. Reductions in
income from internationally-invested trust and sovereign wealth funds was likely
to significantly affect the government’s budgets in Kiribati (Chhibber, 2009: 5);
high fuel prices in Kiribati also significantly increased the debt of the electricity
utility (ESCAP, 2009: 119);
the fall in prices for exports such as timber and palm oil has particularly
affected the Solomon Islands (Jayaraman 2009);
the national reserves are also under stress, limiting capacity for
counter-cyclical strategies.
6 International Policy Centre for Inclusive Growth
Table 2 and 3 highlight trends in the decline in real GDP before and during the crisis,
which constrained responsive and proactive measures on the part of the SIDS, confronted as
they are by continued uncertainty.
TABLE 2
Per Capita GDP in Selected Pacific SIDS
Per Capita GDP Growth in Pacific Island Countries, 1995 - 2009
Country % GDP growth pa % Pop
growth pa
Inflation average
annual rate GDP growth % per capita pa
1995-2004 2005-2008 2009
forecast 1995-2008 2005-08 2009 1995-2004 2005-8 2009
estimate
Cook Islands 3.1 0.2 -0.1 -3.4 4.1 6.5 6.5 -0.1 3.3
Fiji 2.6 -0.5 -1.0 1.0 4.4 7.0 1.6 -0.9 -2.0
Kiribati 4.1 1.9 1.0 1.8 3.3 6.6 2.3 -2.4 -0.8
Marshall Islands -2.0 1.4 0.5 2.6 6.8 9.6 -4.6 0.5 -2.1
FSM (Federated
States of Micronesia) -0.5 -1.0 0.5 0.1 4.8 2.9 -0.6 -1.8 0.4
Nauru Na -8.6 1.0 2.4 3.3 1.8 Na -8.4 -1.4
Palau Na 3.0 -3.0 1.0 5.9 5.2 Na 2.2 -4.0
PNG
(Papua New Guinea) 2.8 5.0 4.5 2.7 4.0 7.0 0.1 2.1 1.8
Samoa 4.1 3.3 -0.8 1.0 5.7 5.7 3.1 2.5 -1.8
Solomon Islands -0.8 7.0 0.0 2.7 10.0 8.3 -3.5 4.0 -2.7
Tonga 2.2 1.8 -0.5 0.5 8.0 6.2 1.7 -0.1 -1.0
Tuvalu 3.3 1.6 1.0 1.3 3.6 3.8 2.0 1.2 -0.3
Vanuatu 1.0 6.8 4.0 2.6 3.2 4.3 -1.6 4.1 1.4
Source: Asian Development Outlook; Asian Development Bank. April/Oct 2009, & UNDP PC estimates.
TABLE 3
Change in GDP (based on constant 1990 Eastern Caribbean dollars)
2007 2008 2009p
Antigua and Barbuda 9.1 0.2 -8.5
*Barbados (1974 prices) 3.5 0.6 -4.0
Dominica 1.8 3.2 -1.5
Montserrat 1.5 6.7 3.6
St. Kitts and Nevis 2.0 4.6 -8.0
St. Lucia 1.7 2.0 -3.8
St. Vincent and the Grenadines 8.0 -0.6 -0.1
ECCU 6.1 1.4 -6.7
Source: Junge, Nils (2009b). Social Implications of the Global Economic Crisis in Caribbean SIDS: Synthesis of the
Findings of 7 country Studies. Prepared for the UNDP Sub-regional Office for Barbados and the OECS for the
Economic Crisis PSIA. Original source: Eastern Caribbean Central Bank National Accounts. 2009.
* Central Bank estimate.
P = preliminary figures.
Working Paper 7
Given the high dependency on public-sector led growth, GDP decline has implications for
the recovery. Appendix 1 provides further information on measures undertaken by SIDS in the
Pacific and the Caribbean. Across the board, they have favoured measures that have implied
foregone public revenues rather than those requiring enhanced or new expenditure.
For example, a number of measures have been instituted, including:
St. Kitts and Nevis: small hotels were exempted from duty and consumption tax
on food and beverage with effect from January 2009. These concessions were later
extended to the restaurant sector;
Barbados implemented a programme to allow employers to defer a portion of
their national insurance scheme (NIS) contributions for employees for one year,
to be repaid at a low interest rate in exchange for their agreement to maintain the
workforce levels.
Despite easing the cash burden in the private sector, these steps would also result in a
decline in the government’s revenue base and thus would affect the government’s ability
to undertake counter-recessionary measures by increasing public spending without
compromising fiscal prudence. In Antigua and Barbuda, revenue collection is expected to
decline in 2009 by about 21 per cent, instead of the 5 per cent expected before the crisis
(Joseph-Brown, 2009a: 30). By December 2009, the government of Antigua and Barbuda had
already mandated a 25 per cent cut in spending by all ministries). In Dominica, government
measures to mitigate the costs of the crisis had already resulted in reduced government
revenue; the measures included a reduction in taxes on cooking gas, lower tariffs on some
products, and an increase in the tax-free allowance from EC$ 15,000 to EC$ 18,000. These
measures were likely to result in EC$ 6.0 million of foregone income for the government of
Dominica (Junge 2009b). While no specific data are available yet to estimate the total fiscal
impact of the measures taken by SIDS, there is little doubt that the effect in most countries is
significant and limits the scope for the kind of Keynesian, demand-management
countercyclical measures that have been the focus of the global, G-20 led debate on tacking
the economic crisis.6
CONSUMER PRICES
One of the more visible impacts of the crisis has been on consumer prices. For SIDS, in
particular, consumer prices are closely linked to energy prices, including that of food. SIDS tend
to be high importers of food, essentially commodity-importing, sometimes importing goods
that they can and do produce locally in order to meet export commitments and maintain
foreign exchange earnings. High transport costs therefore expose food imports to price
fluctuations and variability. The price of fuel can also inflate other costs. All but one country in
the Pacific, Papua New Guinea, import more than 90 per cent of their fossil fuel requirements
(Chhibber, 2009).
The price of rice in Kiribati, for example, doubled between December 2007 and June 2009
(Government of Kiribati and UNDP Pacific Centre, 2009). Inflation rates across the Pacific region
have been visibly affected. Inflation ranged from 3.6 per cent in Vanuatu to a high of 9.0 per
cent in the Solomon Islands (ESCAP, 2009: 112). The implied impact on the capacity of poor
8 International Policy Centre for Inclusive Growth
and non-poor households to meet their food needs is significant, since prices have mostly
affected staples. In Dominica, 54 per cent of the spending of the poorest is on food, compared
to 24 per cent for the richest; in Antigua, the poorest devote 40.6 per cent of their spending to
food, compared to 18.3 per cent for the richest (Dominica CPA Report, 2003; Antigua and
Barbuda, CPA Report, 2007). This further implies a high susceptibility to “food poverty”—that
is, an inability to meet basic food-consumption requirements. In Fiji, it has also been noted that
“88 per cent of the increase in urban poverty depth from rising food prices is from poor
households becoming poorer and only 12 per cent from households falling into poverty”
(UNICEF and UNDP, 2009: 11). Given the already relatively high expenditure on food by the
poor, this is likely to have significant impacts beyond diet and nutrition, and cover children’s
development, access to education and access to healthcare.
As fluctuations happen fast, corrective measures fall behind shifts and often the gap
between benefits and real prices widens considerably. To appreciate further the impact
of the cost of living increases, a cost of living review in Montserrat in 2008 has highlighted
starkly the nature and width of the gap: “social welfare beneficiaries are falling further and
further into poverty as the cost of living increases, while benefits do not change. Shopping
basket and utility costs both increased in 2008, but food price increases were the most
dramatic, with the typical basket increasing by over 7 per cent and the nutritional basket
by almost 165 per cent” (Felicien, 2009b).
The policy options available to SIDS to help households cope with these distortions
are limited in the short term. Fiscal realities make it difficult for governments to subsidise
consumption; supply responses are not feasible given the high share of imports in the supply of
essential commodities. Moreover, this pressure does not stem simply from rising costs, but also
from the multiple demands on income in poor households, which usually include numbers of
children and elderly, and which sometimes survive mainly on one source of income. The 2006
HIES in Kiribati shows that 18 per cent of all children lived in a female-headed household and
that a third of these children were living in poor households. Some 10.7 per cent of all children
were reported as living in households whose head was 60 years of age or more.
Where information is available, the gap between benefits and the cost of living during
the crisis highlights significant challenges for the poor in particular. Current social assistance
programmes have been unable to match the rising cost of living in most countries. In
Montserrat, where comparative data were available over a period of years and a cost of
living/hardship review was conducted in 2007/8, the gap between benefits and needs was
estimated at between US$ 320 and US$ 510 per single-person household. The 2008 Cost of
Living Report indicated that a single-person household required a minimum of between
US$ 937 and US$ 1,212 a month to survive, with a shortfall of between US$ 337 (36 per cent)
and US$ 612 (50 per cent) a month (Felicien, 2009b).
HEALTH
Poor diet and inadequate nutrition emerged as potential impacts of the global economic crisis
from the analysis of the Samoa 2006 HIES (Government of Samoa and UNDP Pacific Centre,
2009). Poor diet and nutrition could lead to declining education outcomes, particularly among
young children, as well as health problems in households. The limited fiscal space available to
Working Paper 9
governments hampers their ability to (further, in some cases) subsidise healthcare and food
support. This has a significant effect on the food-poor, a substantial share of whom are elderly,
persons living with HIV and/or AIDS, and people with disabilities. Nutrition is critical to the
management of HIV and AIDS. Equally, for adults and the elderly, consistent sources of
nutrition are critical to avoiding lifestyle diseases such as diabetes and hypertension, or to
managing them effectively.7
In Dominica, before the crisis, 23 per cent of poor households included a person with
disabilities, 10 per cent had someone with a long-term illness, and 27 per cent had persons
who were diabetic or hypertensive (Government of Dominica and Caribbean Development
Bank, 2003: 87). As a result of the crisis, therefore, increased demand on income from
higher prices and higher costs or the unavailability of medicine would be felt particularly
in poor households.
Though data are not available for household access to insurance in SIDS generally, 2008
figures from the World Health Organisation (WHO) provide a proxy for dependence on the
public provision of healthcare in the Caribbean and the Pacific. The lack of insurance,
particularly health insurance, potentially exposes the poor and vulnerable in St. Kitts and Nevis:
it is estimated that about 70 per cent of the population had no access to health insurance
(Felicien, 2009a). The minimum investment in healthcare across SIDS stands at 10 per cent of
GDP, and on average the government bears 60 per cent of the costs (public spending on
health as a percentage of total spending on health (see Table 4 and Figure 1).
TABLE 4
Expenditure on Health in Selected SIDS
Source: WHO Stats database and ADB. WHO (http://apps.who.int/data/search.jsp).
Country
Expenditure in
health as % of total
government
expenditure
General government
expenditure on health as %
of total expenditure on
health
Source
Antigua and Barbuda 11.3 (2006) 67.4 WHO 2008 Stats Database
Barbados 11.9(2006) 63.5(2005) WHO 2008 Stats Database
Dominica 9.2 (2006) 64.5(2005) WHO 2008 Stats Database
St Kitts and Nevis 9.5 (2006) 63.1% (2005) WHO 2008 Stats Database
Fiji 9.1(2006) 70.9 (2006) WHO 2008 Stats Database
Kiribati 13.0 (2006) 92.4 (2006) WHO 2008 Stats Database
Samoa 10.5 81 (2006) WHO 2008 Stats Database
Solomon Islands 12.6 93 (2006) WHO 2008 Stats Database
Vanuatu 10.9 64.7 WHO 2008 Stats Database
10 International Policy Centre for Inclusive Growth
FIGURE 1
Comparison of Public Health Expenditure in SIDS and Three Emerging Economies
The information in this database is provided as a service to our users. The responsibility for the interpretation and
use of the material lies with the user. In no event shall the World Health Organization be liable for any damages
arising from the use of the information linked to in this section. For explanatory notes, please refer to the latest
version of the World Health Statistics publication available at: <http://www.who.int/whosis/>.
Comparing these investments to those of developing Asian economies (China, India
and Thailand), the expenditure by SIDS is significantly higher except for Thailand.
This highlights the extent to which the state largely facilitates access to healthcare
broadly across society in SIDS.
EMPLOYMENT
Income losses brought about by the crisis have stemmed mainly from loss of employment and
reduced working hours. SIDS remain challenged in identifying sustainable sources of income
and livelihoods for their citizens. Youth unemployment and underemployment are particularly
acute in the Caribbean and the Pacific. Poverty data for the Caribbean reveal significant levels
of working poor who are unable to make ends meet (UWI, 2006). The narrow boundaries of
the SIDS’ economies limit job opportunities for school-leavers in the formal market.
According to the International Labour Organisation (2009), the regional unemployment
rate in South-East Asia and the Pacific is estimated to have risen to 5.6 per cent in 2009.
Between 2008 and 2009, employment fell by 1.2 per cent in Latin America and the Caribbean,
and employment growth in 2009 was only 0.2 per cent (ILO, 2010). As formal-wage
employment remains low in many Pacific SIDS, including Vanuatu, where the formal-wage
sector accounted for only 18 per cent of the working-age (15–64 years) population (Duncan
and Nakagawa, 2006: 39), forms of sustainable income and protective mechanisms are
imperative, especially in times of crisis.
Working Paper 11
BOX 1
Gender Dimensions in Employment
Another facet of the transmission of the crisis through employment is the segregation of the labour
market in SIDS. Evidence suggests that employment in the Pacific is to some extent divided along
gender lines, which can have impacts disproportionately affecting either men or women depending on
the sector most affected. Pre-crisis data on employment in the Pacific, noting a substantial gender gap
in labour force participation in South-East Asia and the Pacific, suggest significant impacts on
households with only one employed adult or on those headed by women. Data from the ILO (2009)
indicates that 82 per cent of men of working age (15 years and older) active in the labour market
versus approximately 57 per cent of women (page 34); with the implication that a number of
households may have only one consistent income-earner.
Additionally, the domination of men in the private sector compared to women in the public sector
exposed men specifically to income losses from the crisis as it impacts on the tourism and construction
sectors in particular. At the same time, female headed households are often dependent on insecure
jobs or employment in the informal sector.
Informal-sector employment, which seems to dominate the labour market dynamics
of SIDS, is characterised by a number of features that expose households to significant
vulnerability: seasonality, high mobility and turnover, and the lack of structural protective
mechanisms. This results in stochastic uncertainty governed by micro factors that are far
beyond the control of individuals themselves, and even governments. Households dependent
on income from the informal sector experience a greater level of uncertainty than those
involved in regular wage labour, exogenously inelastic.
Additionally, while households compensate for the loss or decline of income by growing
their own foods or other measures, own-consumption (as this is termed) probably provides
limited cover for households while also potentially exposing them to further income deficits as
a result of the increase in the costs of agricultural inputs. Households are making clear choices
about which bills/expenditures should be prioritised, as emerged from focus groups in the
Caribbean (Junge, 2009b).
REMITTANCES
In both the Pacific and the Caribbean, remittances have traditionally been very important in
the coping strategies and economic viability of households. Data suggest modest-to-high
contributions to GDP across Pacific island countries: in Samoa, remittances account for more
than 20 per cent of GDP (ESCAP, 2009: 118). In Kiribati, remittances contributed about 10 per
cent of all household income, with only a slighter lower contribution to rural households
(Government of Kiribati, 2006: 14). It is estimated that remittances from seafarers alone
contributed 14 per cent of GDP during the last decade in Kiribati (Browne and Mineshima,
2007: 3), and in Fiji they accounted for an estimated 7 per cent of GDP in 2005.
The Caribbean Economic Overview 2002 placed the level of remittances, measured
as a proportion of GDP, at 5–6 per cent, higher than any other region in the developing
world (CGCED, 2002a). A review of the decline in remittances by the UNDP Regional
Bureau for Latin America and the Caribbean in 2009 estimated that remittances
12 International Policy Centre for Inclusive Growth
contributed as much as 8 per cent of GDP in Dominica (RBLAC, 2009: 5). Curiously, in
Dominica, remittances were a source of support to 38 per cent of the poor and 35 per
cent of the non-poor (Junge, 2009a, based on 2003 Country Poverty Assessment results).
This requires us to adapt our understanding of the non-poor.
Remittances, therefore, make a significant contribution to GDP and also to private income
and expenditure at the household level. These contributions from overseas for family and
relatives have evolved in many ways as a private form of assistance, allowing many
households, poor and non-poor, to weather crises and meet their basic needs. The
contribution to households in Kiribati, which experience an income deficit annually, would be
significant. The sharp impact of the global crisis on jobs in the United Kingdom, the United
States and Canada have had immediate impacts in the Caribbean, particularly as regards
remittances. Participants in focus group discussions have outlined the impact of this loss of
income from relatives and family, especially on their capacity to weather the crisis.
The crisis is also likely to have an impact through declining migrant work opportunities, as
well as rising unemployment levels and other knock-on effects in migrant-receiving countries.
These economies have been highly affected by the crisis as well, experiencing high job losses
and rising debt as housing bubbles have burst. This will directly affect the capacity for relatives
overseas to send remittances at all, or to maintain similar levels of contributions. This also
reduces the options available to those still living in Pacific island states, who may otherwise
have seen migration as a short- or long-term solution to household income challenges. Some
of the decline in remittances has been exacerbated by the weakening of the US dollar.
BOX 2
Source of Remittances in the Pacific (reproduced from Connell and Brown, 2005)
Fiji: Emigration as a result of ethnic tensions in the late 1980s and early 2000s by Indo-Fijians including
doctors, nurses and computer specialists, to Australia, Canada and New Zealand resulted in a decline in
the Indo-Fijian share in the population from about 50 per cent to 40 per cent. Approximately 80,000
persons migrated in total. Ethnic Fijians have also been longstanding participants in United Nations
peacekeeping forces, contract workers in Afghanistan and Iraq, and professional rugby players in
Australia, New Zealand and Europe.
Kiribati: Seafarers who have been certified as high quality by the International Maritime Organisation
are employed on vessels operating worldwide. They normally obtain renewable one-year contracts
following graduation from the Kiribati Maritime Training Institute, which was established with United
Kingdom assistance in the 1970s.
Samoa: Large communities from Samoa have existed in New Zealand for many years and generally
maintain very close links with their home countries, even after two or three generations. There are also
sizeable numbers in Australia and the United States, primarily employed in construction, and agriculture.
Numbers living abroad exceed the local population. Well-established links ensure a continued flow of
migrants, even as substantial numbers regularly return home, especially in retirement.
The news, however, is not all negative; seasonal work schemes between Pacific island
countries and Australia and New Zealand are expected to continue to provide opportunities
for remittances and other private transfers. Additionally, as those economies recover,
opportunities for new work are likely to arise. The issue of remittances also raises interesting
Working Paper 13
questions for SIDS in terms of education and labour market dynamics. Should SIDS proactively
identify a portion of their labour force for migrant work as part of a defined labour-market
policy? It seems that Pacific SIDS have done this to some extent, with quota programmes in
Australia and New Zealand and the seafarers programme linked to the International Maritime
Organisation (see Box 2). This may be a strategic approach that could also be considered in
the Caribbean, where investments in education do not have to result in a loss for the country,
given the lack of job opportunities, but could be part of a strategic response to other countries’
need for skilled labour in key areas.
As the Caribbean continues to be a source of skilled labour in the form of nurses, teachers,
and, in the past, police officers and bus drivers, for non-independent territories of Great Britain
and for Great Britain, the United States and Canada, governments will have to reconsider
investments in education. There is growing recognition that, without a strategic approach,
investments in free education will continue to result in significant losses of public investment.
There is little data to prove that remittances, as important as they have been, have provided
equal compensatory benefits for such losses.
TOURISM
Tourism is the leading export of many SIDS. As unemployment and economic uncertainty
persist, impacts on tourism arrivals and receipts have been visible. The decline in the tourism
(Table 5) and construction sectors has affected GDP, employment and incomes significantly.
These challenges and impacts are consistent across both the Caribbean and the Pacific,
highlighting the structural vulnerabilities of the tourism sector as a whole.
TABLE 5
Annual Percentage Change in Tourist Arrivals in Selected SIDS (2007–2009)
Destination 2007 2008 2009 (YTD)*
Antigua & Barbuda 3.2 1.5 -12.9
Barbados 1.8 -0.9 -8.5
Dominica -8.8 2.6 -3.5
Montserrat -2.7 -5.0 -15.3
St. Kitts and Nevis -7.4 -13.6 -
Fiji -1.5 8.8
-24
(average for Jan-March)
Kiribati 42 -32.8 ..
Solomon Islands 17 .. ..
Vanuatu 9.1 16 ..
Source: CTO, Government Statistics website (Vanuatu, the Solomon Islands, Kiribati and Fiji); UNDP Pacific Centre.
* YTD = year to date.
In 2006, the tourism sector provided 1.9 million jobs overall in the Pacific region,
representing 14.5 per cent of total employment. In the same year, it provided 31 per cent of
total employment in Fiji and 42.4 per cent in Vanuatu (ESCAP, 2008: 174), and thus any decline
in the sector would have severe impacts on employment and income in those countries. In the
14 International Policy Centre for Inclusive Growth
Caribbean, the sharpest declines were in some of the smallest SIDS in the region, namely
Anguilla, Montserrat, and Antigua and Barbuda. The construction sector is noteworthy
because, unlike construction in other countries, it is driven to a large extent by demand from
sources in the United Kingdom, the United States and Canada. The recent construction boom
has favoured high-priced condominiums, townhouses targeted at the second-home market
based largely in the United States and the United Kingdom (CDB, 2008). Many of these projects
were put on hold by the middle of 2008 and for most of 2009 as the effects of the global crisis
continued to unfold (IMF, 2009a). The closure of the Four Seasons Hotel for most of 2009 in
Nevis (see Box 3) resulted in a 30 per cent drop in income for the Nevis government and
caused significant expenditure squeezes.
BOX 3
The Experience of Nevis in the English-speaking Caribbean
The closure of the Four Seasons Hotel, Nevis’s largest and most significant hotel, for most of 2009 has
had significant effect on both employment (10 per cent of the labour force has been impacted) as well
as revenue-generation for the government. The closure has resulted in a decline of 30 per cent of
income for the Nevis government and resulted in significant expenditure squeezes. Out of a labour
force of 6,290, with unemployment rate already at a rate of 8.2 (Felicien 2009b), a further 700 employees
have been out of work for a year. This experience highlights the dangers of dependency on one or two
sources for income and employment.
The IMF’s World Economic Outlook 2009 noted the following impacts for tourism in the
Pacific: a 5.5 per cent decline in tourist arrivals in 2009 for all Pacific island countries; and actual
year-to-year arrivals from Australia and New Zealand had fallen by 13 per cent by March 2009.
A rebound in the tourism industry is expected to be slower in the Caribbean than in the
Pacific. While Asia emerges from the economic crisis with a solid enough recovery, the
economies of the United States and Europe—the main sources of tourists in the Caribbean—
remain much weaker.
DIFFERENTIATED IMPACTS WITHIN COUNTRIES
When considering multi-island nation states such as Fiji, the Solomon Islands and Vanuatu
(as well as Antigua and Barbuda, and St. Kitts and Nevis in the English-speaking Caribbean),
care must always be taken to avoid assumptions that impacts in the main island reflect those in
the outer islands. For example, contractions and concentrations of services in Antigua have
caused Barbudans to face higher costs of access to goods and services, including food prices.
Nevis’s exposure to the crisis seems sharper than that of St. Kitts,8 given the closure of the Four
Seasons for almost a year during the crisis period (Felicien, 2009b). In the Solomon Islands and
other countries of the Pacific there have been varied experiences of hardship; levels of inequality
have been higher in urban households than in rural ones, and the costs of food have usually
been higher in urban centres than in the countryside. In Vanuatu, the poverty gap index for Port
Vila, at 10.6, was higher than for the rest of the country, suggesting a marked difference between
the better off and the poor in the national capital (ADB, 2009). In Kiribati, the decline in cruise
vessel visits to the Line Islands is severe affecting the livelihoods of the people on the isolated
island of Tabueran (Government of Kiribati and UNDP Pacific Centre, 2009).
Working Paper 15
Equally, while analysis normally looks at remittances from outside the country, the effect
of urban-rural and inter-island remittances is not insignificant. In Tanna, Vanuatu, remittances
from urban migrants are the single biggest source of income in several villages (Connell and
Brown, 2005, from Winthorpe 2004).
The unique position of non-independent states is also critical to the context. Even with the
commitment of support from the home state, which normally might make non-independent
SIDS less vulnerable, SIDS like Montserrat face the possible transmission of crisis impacts through
that very connection. The effect of the crisis on the British banking sector potentially imperils
Montserrat’s capacity to recover and the government’s ability to address other crises that may
not emerge immediately. About 80 per cent of the recurrent budget and 100 per cent of the
capital expenditure is funded by development aid from Britain, through the Department for
International development (DFID) and, to a lesser extent, from the European Union (EU) (Felicien,
2009b). The weakening of the British pound had immediate consequences for the 2009 budget
of Montserrat’s government; any further weakening of the British economy would significantly
affect the budget and programming of the government of Montserrat.
GENDER
Gender has consistently been a source of inequality in SIDS. Women are underrepresented in
the formal sector and labour market segmentation still results in jobs that are ‘’traditionally
female” (ESCAP 2008b). This also limits employment possibilities for men, particularly young
men, as well as those for women. Labour market dynamics are such that, usually in a post-
recovery phase, men benefit significantly because of the boom in construction, which is
traditionally male-dominated in SIDS.
In the Solomon Islands, female-headed households seem to be somewhat disadvantaged
overall: they have slightly higher representation in the three lowest expenditure deciles and
higher representation in poor rural households (Government of Solomon Islands and UNDP
Pacific Centre, 2008: 4). Combined with the fact that less than a third of the employed are
women (ESCAP 2008b: 4) and that female-headed households account for 6.5 per cent of all
households, of which 7.3 per cent fall below the BNPL, female-headed households are clearly
challenged to cope in the current crisis.
In the English-speaking Caribbean, labour force participation is also unequal for men and
women. In some cases, female-headed households dominate the lowest quintiles and female
unemployment outstrips that of men. In St. Kitts and Nevis, the labour force participation rate
for women was 71.6 per cent, compared to 87.2 per cent for men (St. Kitts and Nevis CPA, 2008:
25). In Barbados, female unemployment was slightly higher than male unemployment in 2008
and 2009: 9.4 per cent against 7.8 per cent in 2008, and 10.1 per cent against 9.9 per cent in
early 2009 (Joseph-Brown, 2009b: 30). Interestingly in St. Kitts and Nevis, women’s
unemployment exceeds that of men mostly in the higher quintiles (quintiles 3–5) and not in
the poorest. Conversely, unemployment seemed to affect young men particularly (St Kitts and
Nevis CPA, 2008: 27).
In Kiribati, gender dynamics play out differently. Out-migration of working-age males
from some islands has led to an increase in dependency rates, such that there are insufficient
numbers of young men to undertake much of the traditional work associated with subsistence
16 International Policy Centre for Inclusive Growth
livelihoods (Government of Kiribati and UNDP Pacific Centre, 2009: 27). This facet of
employment and gender inequity is not unique to Pacific island countries.
The diversity of the experience and the fundamental vulnerabilities facing various groups
in the SIDS also suggest that “one-size-fits-all” approaches will not be useful in addressing
social, economic and environmental vulnerability.
4 IMPLICATIONS OF THE CRISIS FOR SOCIAL VULNERABILITY IN SIDS
Social vulnerability reflects the degree to which societies or socioeconomic groups of people
are affected negatively by internal and external stresses and hazards that have adverse effects
on a country’s social cohesion. While the social vulnerabilities caused by these stresses and
hazards are no more endemic to SIDS than to other developing countries, the natural
recurrence rate in SIDS is higher (IPC, 2007). Given SIDS’ limited capacity to respond
adequately, the social impact of such stresses could be permanent, rather than transitory as in
many other cases.
Social vulnerability can be analyzed by identifying the transmission mechanisms of
macro-level exogenous shocks on households. Table 6 provides an example of such impacts,
all of which increase social vulnerability.
TABLE 6
Transmission Channels of Economic Crisis and Impacts at the Macro and Micro Levels
Transmission
channel Macro-level impacts Micro (household)-level impacts
1. Income
Decline in exports limit government revenue
Loss of employment and income limit
government revenue from income tax and
customs duties
Limit government capacity to implement
programmes and pressures social provisioning
Lower incomes leading to reduced
consumption and switching behaviour
Inability to pay bills and increasing private debt
Limited capacity to meet basic needs for food
and non-food items
2. Employment
Loss of employment and income limit
government revenue from income tax and
customs duties
Greater pressure on government for social
assistance for unemployed
Government capacity to focus on efficiency in
public sector hampered by need for jobs
Loss of jobs leading to lower income and spill-
on effects
New entrants to labour market exceed
availability of jobs – youth unemployment and
unemployment skyrockets;
Increased activity by households in the informal
and illegal economy;
3. Consumption
Slowing domestic economy affects lending, and
access to credit;
Affects revenue of small and large businesses
Reduced consumption leading to reduced
private sector activity
Declining food consumption leading to
malnourishment and increased morbidity –
health impacts
Increasing dependence on subsistence and
own-production
6. Health
Health budget squeeze
Increase in non-communicable diseases
(NCDs) due to diet changes
PLHIV and PWD need more public assistance
as private assistance dries up or slows
Reduced access to health care due to limited
government support or subsidies
Rising cost of some medicines
Sexually risky behaviour expands as coping
strategy
8. Revenue and fiscal
space
Redistribution of funds away from social
transfers and publicly funded programs,
Weakening of social protection mechanisms
Poor and vulnerable depend more on private
sources of assistance
Increasing underemployment just to make
ends meet
Working Paper 17
Exposure to natural disaster
Female-headed household
Low health status
Nation
(Individual,
Household or
Community)
Living in disaster prone areas
Sub standard housing
Adequate level education
Social Susceptibility Social Resilience
Health well-being
Strength of social capital
Economic well-being
Measure of social vulnerability
Low level of economic well-being
Adequate levels of housing
9. Remittances
Reduction in contribution to GDP
Increasing number of households needing
assistance
Direct impact of household income and
expenditure
Implications for education and health costs
particularly for children
10. Tourism
Declining tourism arrivals and tourism receipts
Hotels close or narrow operations and reduced
private sector activity
High job losses or reduced hours
Loss of income for main breadwinner (s)
Small business including handicraft
immediately impacted
Search for alternative sources of livelihood
11. Exports and
imports
Reduced exports leading to reduced private
sector activity
balance of payments crises and fiscal deficits
Higher demand for government-led solutions
Consumer prices and affordability of items
Access to inputs for small businesses or own-
production
Jobs
12. Increased
consumer prices
Government subsidies?
Reduced private sector activity Reduced household consumption
13. Debt
Competition for scarce resources among
national interests
Inability to repay loans and meet repayment
commitments from commercial and other loans
Private debt increases
Inability to make repayment commitments
From a review of the preceding section, it is clear that many of these transmission
mechanisms have been at work in SIDS in both regions, in many cases at the same time, and
leading to a sharp rise in social vulnerability. The income impact, for example, is not just the
direct loss of income but the impact of limited government revenue to limit or compensate for
income losses, high youth employment,
job losses and reduced working hours,
declining remittances and the negative
effect of price volatility on poor and
vulnerable households. In the Pacific, the
traditional extended family social structure
can mean that even the households of
those in relatively well paid public or
private-sector jobs can still fall below the
basic-needs poverty line. In the Caribbean
this has changed, but overall in small
states one is more likely to find informal
and personalistic networks operating as
substitutes for more formal assistance
(Bertram, 2009), including the “sou-sou”—
an informal savings programme among
groups of people practiced particularly in
Dominica and St. Lucia, as well as other
islands in the Caribbean.
In the Pacific, the numbers living in the households of those in formal employment are
often swollen by visiting relatives who will expect to be looked after by their better-off kinfolk.
The scope and duration is also such that traditional coping mechanisms (informal-sector
income, remittances from relatives abroad, growing your own food and selling the surplus on
the local market) are likely to have only a limited impact.
Source: Kambon, 2005 – Presentation on Social
Vulnerability and PRSPs.
18 International Policy Centre for Inclusive Growth
For SIDS, moreover, the escalating pressures from natural disasters on a constrained fiscal
environment are highly significant. Appendix 2 in this paper seeks to capture some of the
disasters affecting SIDS in the Pacific and the Caribbean over the last 20 years or so; the
number of frequency of events highlights the constant challenges faced by SIDS. In some
countries, more than 40 per cent of the population has been affected during a typical disaster
year (Tonga and Samoa, for example). As in the Caribbean, impacts are not felt through the
number of deaths but through the loss of social and economic investment (UNDP Pacific
Regional Centre, 2008). Usually, the impacts of natural disasters are even more significant
because of damage to drivers of the economy, such as tourism.
On the surface, like most middle-income countries, SIDS invest significantly in the public
provision of health and education, and have made much progress. These investments have
resulted in relatively high literacy levels (above 90 per cent for most SIDS) and long life
expectancy (UNDP, 2009a). Barbados’s development has been anchored in education and
health. Prasad and Kausimae (2009: 29) note in the case of the Solomon Islands that “in terms
of social policies the Solomon Islands, like many other small developing states, concentrated
on education and health as major priorities, with some attention on the housing sector”.
To some extent, through these investments governments have attempted to guarantee
”access for all”. The capacity of SIDS to sustain these levels in the long term, however, is in
doubt (see Table 7). Investments in education, as seen below, exceed 10 per cent of all
government expenditure and generally stand at 6 per cent of GDP.
TABLE 7
Percentage (% ) Expenditure in Education in Selected SIDS
Country Public expenditure in
education as % of GDP
Public expenditure in
education as % of all
government expenditure
Source
Antigua and Barbuda 3.87 (2002) .. UNData*
Barbados 6.7 (2008) 15.7 (2008) UNESCO
Dominica 4.8 (2008) 11.3 (2008) UNESCO
Montserrat .. ..
St Kitts and Nevis 9.66 (2005) 12.7% (2003) UNData
Fiji 6.24 (2007) 20% (2004) ESCAP Statistical Yearbook
for Asia and Pacific**
Kiribati 12.9 (2008) .. ESCAP Statistical Yearbook
for Asia and Pacific
Samoa 7.5, (2008) 14% (2002) ADB, 2009
Solomon Islands 5.4% (2004) 25.97.% (2005)
ESCAP Statistical Yearbook
for Asia and Pacific; Prasad
and Kausimae, 2009
Vanuatu 6.1 (2008) 28.1(2008) Vanuatu Economic Report,
pp.31 and UNESCO
Source: * http://data.un.org/Data.aspx?d=UNESCO&f=series%3AXGDP_FSGOV
** http://www.unescap.org/stat/data/syb2008/index.asp
http://stats.uis.unesco.org/unesco/TableViewer/tableView.aspx
Working Paper 19
As a result, human development in SIDS has been steady and measured as high. In both
regions, most countries fall within the range of medium-to-high human development.
Barbados alone falls into the category of very high development; it is the only one of the SIDS
to have achieved this level and to have maintained it for the last 5–10 years. Rankings on the
human development index (HDI) for Pacific countries have been generally robust, as countries
have maintained steady progress and have often improved their HDI. Between 1998 and 2005,
Vanuatu progressed from 140 out of 174 countries to 120 out of 177 (ADB, 2009: 3). The
Caribbean, on average, ranks higher than the Pacific on the HDI: Barbados is at 37 and St. Kitts
and Nevis at 50, compared to Samoa at 94 and Fiji at 108 (UNDP, 2009).
The track record on poverty and inequality, however, has not been as positive (Table 7).
Even when economic growth was robust, it failed to reduce the proportion of the poor,
including the food- and asset-poor (UNDP Pacific Centre, 2008: 84). The 2006 HIES for Samoa
notes that: “Despite the six years of relatively good economic growth that was achieved in the
period between the household surveys of 2002 and 2008, the level of hardship and poverty
being experienced by the least well-off in Samoa society has not improved. The increase in the
level of inequality as measured by the Gini coefficient, and the accompanying increase in the
depth of poverty as measured by the poverty gap index, suggest that the economic growth
did not really benefit the most disadvantaged” (Government of Samoa and UNDP Pacific Centre,
Draft Poverty Report 2009: 13). The picture is similar in the Caribbean, where decent growth has
been counter-balanced by poverty rates ranging from 13 per cent in Antigua and Barbuda and
Barbados, to the mid 20s in Saint Lucia, and to almost the 40s in Dominica (Table 8).
TABLE 8
Socioeconomic Indicators for Selected SIDS
Country Population HDI Rank
GDP per
capita*
Poverty rate (head
count index) (%)
Gini-
coefficient
Antigua and Barbuda 85,362 47 17,966 18.3 0.49
Barbados 274,000 37 18,691
13.9 9(1997 CPA, new
CPA underway) ..
Dominica 71,898 73 7,893 39.0 0.35
St. Kitts and Nevis 45,000 62 14,481 21.8 0.45
Montserrat 5,000 .. 3,400 .. ..
Samoa 187,000 94 4,467 20.2 % 0.47 (2008)
Solomon Islands 506,992 135 1,725 32.2(2006) 0.36
Kiribati 92,533 .. 1,295 21.8%
0.39 (2006
HIES Survey)
Fiji 837,271 (2007) 108 4,304 34.4. (2002/3) ..
Vanuatu 124,737 (2009
Census Report) 126 3,666 27.2 ( 2006) 0.41
Source: Adapted by the authors from various sources, including the Human Development Report 2009 and several
CPA reports.
* PPP US$ 2007. Sources: HDR 2009, Synthesis report for Economic crisis PSIA/CPA Reports, PSIA Reports for Samoa
and Kiribati by Stats office and UNDP Pacific Centre (drafts September 2009); Statistical Office websites, Solomon
Islands HIES 2005/6].
20 International Policy Centre for Inclusive Growth
The SIDS’ experience of poverty has differed significantly from that of other countries.
Poverty has taken the form of disadvantage: relative in terms of income and the capacity to
address basic needs, as opposed to absolute deprivation. This has often been shown by the
struggle of poor and vulnerable households to meet their food needs, their dependence on
government assistance for long periods, and their dependence on relatives overseas for
remittances to supplement household incomes (Analytical Reports from Kiribati and Samoa
HIES Reports, 2009; CPAs in the English-speaking Caribbean between 2001–2008). Poverty in
SIDS has also become intertwined with “inequality”. Usually, this has been evident in gaps in
access and assets between men and women, between adults and children, and between
different income groups in society.9 Poverty and inequality have persisted despite significant
investments in education and health, as well as in the face of vibrant tourism, small
manufacturing and an active financial investment sector.
Where there is high social vulnerability, it is particularly important to monitor the impact
of exogenous shocks on the non-poor. The non-poor include those likely to stimulate
economic recovery, including the expansion of jobs and new sectors. It is clear, though not
easy to prove, that the crisis has had implications for their livelihoods too. The non-poor have
also experienced losses through the decline in business profitability or even the closure of
firms, as well as the loss of investments. As a result of their previous income and investments,
some of these “new poor” are unlikely to easily qualify for government assistance under the
existing rules for social welfare provisioning. We have examined a number of Poverty and
Social Impact Analyses (PSIAs) completed in 2009 for the Caribbean and similar analysis of HIES
in the Pacific, and find little evidence of specific approaches to address the “new poor”. In the
case of the seven studies on the economic crisis in the Caribbean, Junge (2009b: 31) notes that
“in general, there have been relatively few new social protection measures, and they have
been minor in scope”. Appendix 1 provides further details of the range of measures
implemented in both regions, as data has been available.10 What emerges is a picture of coping
and survival in very uncertain times, a hedging of bets that nothing more will happen.
SIDS have therefore invested heavily in a human development strategy, specifically in two
public goods: health and education. This has delivered some results. Poverty, however, continues
to be significant and the poverty elasticity of growth does not appear to be high. Thus it is
misleading simply to equate SIDS with other middle-income countries using per capita GDP and
investments in health and education as metrics. With this background the impact of the crisis as
seen through the prism of social vulnerability is all the more pronounced.
5 POLICY FOCUS
The SIDS’ performance on poverty and vulnerability, therefore, is much poorer than would be
expected for their HDI ranking. Hence more attention needs to be paid to the design of social
policy than is presently the case. The approach must be robust, flexible and responsive, as well
as resilient to shocks and the unpredictable. In this context the areas of focus are as follows.
THE ROLE OF SOCIAL POLICY
1. Define and measure vulnerability so that its reduction can be a concrete policy
target. In the Caribbean, some attempt has been made to quantify social vulnerability
in the context of poverty and inequalities, in an effort to improve planning and decision-
Working Paper 21
making. It is estimated that, on average, 5 per cent of the population of Pacific island
countries have per capita income/expenditure that is no more than 10 per cent above
the poverty line. Thus, with a fall of about 10 per cent in the real income of these
vulnerable households, poverty would increase by 5 percentage points. Poverty
assessments in the English-speaking Caribbean, funded by the Caribbean Development
Bank with the support of DFID and in collaboration with UNDP and other partners, have
integrated concepts of vulnerability and wellbeing. Box 4 outlines the approach used in
the Caribbean to estimate vulnerability and poverty. This methodology merits review by
countries in the Pacific.
BOX 4
Pushing the Envelope: Estimating Poverty and Vulnerability in the Caribbean
In collaboration with the Department for International Development of the UK (DFID-UK),
Inter-American Development Bank (IADB) and the UNDP as well as other development
partners, the Caribbean Development Bank has facilitated the expansion of poverty
monitoring to include the concept of vulnerability.
Known as Country Poverty Assessments (CPAs), the Bank has supported Caribbean
governments, particularly those in the OECS, to update information on poverty and
vulnerability over the last 10 years.
The vulnerability line is set at 125 per cent of the poverty line (that is 25 per cent above it).
It measures the number of persons who are susceptible to falling below the poverty line,
should an unanticipated event such as a natural disaster or some types of economic shocks
were to eventuate. Vulnerability is calculated at an agreed standard of 125 per cent of the
poverty line or 25 per cent above the poverty line. Most CPAs comprise: a Survey of Living
Conditions (SLC) and a Household Budgetary Survey (HBS) as well as a Participatory Poverty
Assessment (PPA), which allow the voices of the poor themselves to be heard. CPAs define the
percentage of individuals and households in poverty and which are vulnerable and advance
the process for putting a face to vulnerability in the context of the Caribbean.
Extracted from the Antigua and Barbuda and St. Kitts and Nevis CPAs 2005/6 and 2007-8) on the
CDB website – www.caribank.org
2. Move from welfarist frameworks to targeted actions to reduce social
vulnerability. We find Bertram’s (2009) definition of the “welfare state” in the context
of SIDS particularly useful in understanding the paradoxical nature of social policy in
SIDS. Universal is not always inclusive. While these investments have been development
interventions, they have also been a form of unconditional income transfer and social
protection that are fiscally constraining and difficult to sustain. Employment in the
private sector is unable to provide/guarantee the kind of “security” that comes with
employment in the public sector, thereby diminishing the preference for private-sector
jobs and, consequently, limiting the scope for entrepreneur-led economic
diversification. This highlights the need to avoid the transformation of state-sponsored
assistance and welfare into a form of “perverse subsidy”. By that we mean that rather
than “protecting” in the short term, these interventions stymie creativity and create
dependency in poor and vulnerable households.11
22 International Policy Centre for Inclusive Growth
Evidence from CPAs and HIES in the Caribbean and Pacific respectively underscore the
fact that many poor and vulnerable households experience higher and more frequent
unemployment than non-poor households. This will require the collection of qualitative
and quantitative data, integrated policy approaches (including agriculture, social
welfare, labour, insurance, gender, education and health) and the adjustment of existing
social policy interventions to address uncertainty.
3. Improve the design of social policy frameworks. The institutional management
and implementation of social policy in the SIDS has tended to be treated as a “black
box”; technically, the business is all but centred in one ministry, overwhelmed by
programmes. In many cases, social development and social protection are tasked to one
ministry burdened with many issues, lacking in technical staff and issue-experts, and
under constant budget pressure (Thomas, 2001; James and Noel-Debique, 2005). This
limits the capacity for inclusion and consultation. Often, there are various forms of
legislation governing social development and social policy in SIDS. In Fiji, according to
the 2008 Annual Report of the Ministry of Health, Women, Social Welfare and Poverty
Alleviation, the work of the Ministry on Social Welfare and Women is governed by at
least six pieces of legislation covering juveniles, adoptions, social justices, disabilities,
probation and community work. Health is covered by 17 pieces of legislation. The work
of the Ministry on Social Welfare and Women in Fiji alone covers 11 social policy issues.
A review of social and poverty reduction programmes in Barbados (Lashley, 2006) noted
similar and significant fragmentation and duplication.
In brief, the intention is not to create a European-style welfare state but rather to
create an institutional mechanism that is nuanced in its targeting of scarce public
resources to address poverty and inequality.
BOX5
Social Partnership in Barbados: An Avenue for Responsive Price Control
A very important element in Barbados development landscape is the “Negotiated Prices and
Income Protocol (Social Contract)”, was developed in 1991. One of the main objectives of this
Protocol is to regulate wages and prices, as well as encourage job security through support to
policies designed to maintain jobs and increase employment. This has encouraged a culture of
consultation among the Government, employers and trade unions and a formal Tripartite
Committee was established to resolve problems, avoid work stoppages, and contribute to
investment goals and policies on taxation and revenue generation. The Social Contract is now
in its Sixth Protocol. Sourced in summary from Joseph-Brown, 2009b.
4. Integrate risk reduction into development planning. The experience of Grenada
following Hurricane Ivan (2004) and Hurricane Emily (2005) is striking in this regard.
As a result of Ivan alone, a Category Three storm, 212 per cent of GDP was lost and
90 per cent of housing stock damaged, including government offices. The Pacific
region is no stranger to this type of event: it has been deemed the most disaster-
affected region in the world. Natural disasters have affected more than 3.4 million
people in the region since 1950.
Working Paper 23
Disasters can no longer remain beyond the scope of social planning, dealt with as
somewhat separate to the people they affect. Many efforts that have focused on
“managing risk or managing the event” have failed to address the underlying reasons
for severity of impact. While a hurricane cannot be prevented, its impact can be
mitigated by a number of factors—properly constructed housing and other settlements
and buildings; houses built in stable and secure areas; proper drainage, including
effective tree and plant cover (to absorb high volumes of water); timely and appropriate
house maintenance, and observance of public announcements and removal to shelters
in a timely fashion. The regularity of the events (sometimes several in a season or several
in one month) and the continuing severity of the impact of natural disasters underscore
the need for a transition from “crisis management or response” to “risk reduction and
resilience-building”. There is little evidence that global instruments such as poverty
reduction strategy papers (PRSPS) have really addressed risk reduction. We have been
unable to identify a coherent risk reduction strategy embodied in a PRSP to date.
5. Address labour market issues and take advantage of opportunities such as
“green jobs”. A key question posed by the crisis and the multiplier effects of recent
crises is: how can SIDS identify sustainable forms of income-generating activities?
This is an economic issue as well as a social one—the structure of the labour market is
determined by economic imperatives and therefore the solutions must be social and
economic. In that light, structural reforms are required in the new framework to
promote more inclusive labour markets, active labour market policies, and quality
education and training programmes (ADB, 2009b: 11). Critically, investments in training
should be responsive to market needs, trends and forecasts.
SIDS need to explore the scope for “green jobs”. As the “green economy” concept grows
and expands, and is further integrated into the thinking on sustainable development,
there is significant potential to improve productivity and reduce environmental impacts
through access to microtechnologies for renewable energy, such as in the agricultural
sector. There are also opportunities for jobs and small business development in
ecotourism and natural resource management, ecofriendly products and services, and
carbon-reducing operations throughout the tourism sector. These types of combined
development initiatives could be helpful to SIDS, bringing benefits in a number of
crucial areas, maximising resources and bringing more timely results. They would also
serve to help countries diversify away from public sector-led growth, enable new
businesses to develop, and ease some of the fiscal constraints.
6. Enhance development-partner coherence through joint and multi-country
programming. Acknowledging their small size and limited political power at the global
level, SIDS in the Caribbean and the Pacific have formed regional economic and political
networks and systems. This has already benefited the regions in their efforts to respond
to security matters, management of the seas and their resources, energy issues and
access to markets. This regionalised approach, which could lead to a new kind of “multi-
country programming”, could also be a source of resilience. The establishment of multi-
24 International Policy Centre for Inclusive Growth
country offices in the Pacific (Fiji) and the Caribbean (Barbados, Jamaica, Trinidad and
Tobago), as well as of regional service centres, indicates a recognition by UNDP and
many UN agencies of the benefits of this approach.
THE ROLE OF ECONOMIC MANAGEMENT
If the crisis and its aftermath have widened the acceptability of any one proposition, it is that
economic growth alone is not a panacea for poverty and inequality; economic growth has
been a necessary but insufficient condition of social development. The crucial question is
whether poverty is a consequence of the lack of opportunities to participate in the income-
and wealth-generating process that is clearly in place in most SIDS (albeit with high
vulnerability to exogenous shocks). If so, is this something that can be tackled through
domestic policies, or would the structural changes required to address the issue involve a
globally coordinated response?
1. Advocate global action to create a HIPC initiative for the SIDS. Resources matter.
In some cases the macroeconomic shocks experienced by SIDS have been intensified by
a weak economic policy environment that has given rise to large and persistent fiscal
deficits, and thus to high debt-to-GDP ratios, especially external debt-to-GDP ratios
(Table 8). Account balances in the Pacific, as well as minimal and declining reserves,
make for a tenuous fiscal environment. Debt-to-GDP ratios are particularly high in the
Caribbean, posing a challenging to macroeconomic and fiscal management. Countries
in the Pacific have avoided these levels so far, but should be mindful of the potential
dangers. One of the smallest SIDS, St. Kitts and Nevis, has one of the world’s highest
ratios of debt to GDP: 187 per cent (IMF, 2009c).
TABLE 9
Select Economic Data for SIDS
Country Debt service ratio
(% of revenue, 2007)
Debt to GDP (2007 for Caribbean
SIDS, 2009 for some Pacific SIDS)
Antigua and Barbuda 24% 90%
Barbados 19% 79%
Dominica 85% 100%
Fiji 14.2 (2006 e/WB) 2.2 (% of exports and gas)
Kiribati 3.6% (2006) ..
Montserrat .. ..
Samoa 6% (2006) 39% (2006)
Solomon Islands 2% (2006) 25% (80% in 2006)
St. Kitts and Nevis 39% 187.2%
Vanuatu 1,7% (2006) 32% (2006)
Source: Prepared by the authors on the basis of data from multiple sources (IMF 2009; CIA World FactBook 2009;
UNICEF 2009; ADB, 2008).
Working Paper 25
These adverse fiscal indicators do not stem solely from laxity in fiscal policy.
To some extent they also arise from the expensive stabilisation policies that these
countries had to apply when they faced dramatic cyclical downturns in their
monocultural and remittance-dependent economies. In some cases, such as the
sugar industry in St. Kitts, technological and productive barriers emerged, creating a
vicious cycle of public debt as the government sought to spend on stabilising what
was essentially an emerging structural problem. Thus the legacy effect of public
debt limits current and future fiscal space. It is difficult to see how this can be
addressed without a HIPC-like initiative for the SIDS that is designed to allow
space in the post HIPC adjustment path for probable but temporally unpredictable
exogenous shocks. In this context, the middle-income country designation for most
SIDS, which has resulted in their graduation from access to concessional loans and
funding, is a misnomer. It does not reflect the SIDS’ critical vulnerabilities and often
ignores significant inequalities. This is an important policy issue that has to be
addressed. At present it is largely avoided.
2. Deeper regional coordination. The Eastern Caribbean Currency Union (ECCU) and
the support of the Eastern Caribbean Central Bank helped Eastern Caribbean states
organise, cope and respond to the crisis, individually and as a group. The ECCU’s eight-
point stabilisation programme, agreed to by all members12 has supported joint action
in social protection and benefits from regional-level expertise. In the context of the
macroeconomic measures proposed here, such an approach would add to the
plausibility and feasibility of initiatives to address high public debt, and to create a fund
to respond to exogenous shocks. Given their effectiveness in the Caribbean, current
coordination measures could be expanded in the Pacific to include currency and
economic arrangements. The role of regional institutions and organisations in
facilitating timely responses and changes is already recognised in the Pacific region
(Slade, 2009). This also allows for cyclical approaches to country support and the
socialisation of risk.
3. Socialisation of risk or risk-sharing. This already exists in the Caribbean, in the form of
the CCRIF.13 We propose that this concept should be broadened and integrated into the
macro policy framework for SIDS at a global level. SIDS can do little to limit their
exposure to the global environment, or fundamentally to reduce the risks arising from
environmental change. As part of their resilience-building efforts, such initiatives would
provide a countercyclical support mechanism.
4. A stability and social investment facility for the SIDS. Dervis and Birdsall (2006)
have elegantly outlined the design principles of such a fund for larger middle-income
countries. Since the SIDS are largely in the same category, we believe that the case for
exploring this instrument is tangible and persuasive. The virtuous macroeconomic
benefits of such a fund to expand social protection in times of crisis should at least make
the instrumental case for the use of this fund to address social, economic or sectoral
vulnerability in the SIDS.
26 International Policy Centre for Inclusive Growth
BOX 6
A Stability and Social Investment Facility for the SIDS
Dervis and Birdsall (2006) proposed a “Stability and Social Investment Facility” (SSF) to be
housed either at the IMF or the World Bank. As long-term facility to help high-debt emerging
market countries cope with and ultimately overcome what will otherwise remain a chronic
structural weakness. In our view, the creation of such an institution for the SIDS, possibly with
support from regional development banks working in collaboration would also serve to
overcome the chronic structural weaknesses that we have identified in the preceding
sections. The SSF would be an instrument providing a steady and predictable source of funds
for addressing structural change as well as a strong policy signal to help high-debt emerging-
market economies reduce their debt burden without having to forgo vital pro-poor social
expenditures and growth programs. The financial cost to the donor community would be the
interest subsidy built into the SSF; were the subsidy 200 basis points, the cost in the first year
would be US$ 20 million for every US$ 1 billion of lending.
5. Explore new sources of finance. Climate change threatens further to challenge the
development dynamics in SIDS, with increasing natural events and other long-term
changes. This is both a challenge and an opportunity. The second meeting of ministers
of the four BASIC (Brazil, South Africa, India and China) group countries in New Delhi on
24 January 2010 called for the early disbursement of the pledged US$ 10 billion in 2010,
with a focus on the least developed countries, small island developing states and
African countries (UNEP, 2010). This follows the consensus among participants at the
Commonwealth heads of government meeting in December 2009, which called for the
Copenhagen Launch Fund to be initiated in 2010 and to be built up to US$ 10 billion a
year by 2012, with 10 per cent of its resources being dedicated to small island states
(Commonwealth Secretariat, 2009). SIDS must ensure these funds are available as soon
as possible, and must take full advantage of them. They should be used to the
maximum to address fundamental vulnerabilities. Hard choices are needed, including
the institutionalisation of building codes, preventing building on and near fragile
shorelines, and sanctions for environmental degradation.
6. Avoid making government the employer of last resort. An important source of
potential vulnerability is the government’s role as the biggest employer and the large
share of government services in GDP and income. In Kiribati the public sector dominates
the domestic economy, providing almost 66 per cent of all paid employment and close
to half the monetary GDP (Government of Kiribati and UNDP Pacific Centre, 2009). In
Vanuatu, more than 50 per cent of the recurrent budget is spent on the public wage bill
(ADB, 2009: 7); in 2003, government services as a source of labour was second only to
wholesale and retail (Prasad and Kausimae, 2009). This has significant implications for
the government’s flexibility (fiscally and through social assistance) to respond to crises.
As we move, it is to be hoped, into a post-recession period from 2011 onwards, we have
proposed certain aggregate but necessary measures that the development community could
consider—in partnership with the governments and peoples of the SIDS—to ensure things are
better in the future. In so doing, we have made the case that in the case of the SIDS, social
Working Paper 27
protection should be at the heart of efforts to mitigate the impact of exogenous shocks. There
are still structural issues that require action and that are key to improving resilience, as opposed
to enhancing vulnerability, including:
How can the pro-poor content of economic growth be enhanced, given the
volatility in the income and revenue bases of SIDS at the country and
household levels?
What can be done to rapidly and sustainably diversify the economies of the SIDS?
Small societies that are also micro-states are usually constructed socially on small,
independent communities. They are usually self-contained in all social respects
and inclusive, possessing their own organs of political representation and a self-
conscious political identity. Within this reality lie many sources of social capacity
and capital that can build social resilience (Bertram, 2009). This is an important
advantage underlying the political economy of many SIDS, which in our view have
catalyzed the positive and successful responses to the crisis that we have
highlighted above. Thus, how can policy processes be improved by learning from
the positive experiences in responding to the challenge of the crisis?
6 CONCLUDING REMARKS
With access to health services ranging from a little more than 80 per cent to 100 per cent, high
levels of school enrolment, and literacy and life expectancy well above average, the SIDS have
secured human development in the dimensions that are often missing in other countries
(access to public and merit goods). Paradoxically, however, they have been unable to address
some of the more fundamental ills of underdevelopment, namely poverty, vulnerability and
inequality. Additionally, the fiscal and macroeconomic position of the SIDS continues to make
them highly vulnerable in light of their high levels of public debt and the other macro and
fiscal challenges mentioned earlier.
The crisis signals a general need for SIDS to focus on building resilience. This does not
negate, but rather reinforces, the need for action by the global community. This is not just
about more development assistance. It is likely that SIDS will always need some level of
external assistance for problems far beyond their control and capacity, given their huge
exposure to exogenous shocks. It is recognised world-wide that SIDS will require the long-
term support of the global community. Like any development solution or approach,
“resilience” cannot stand alone. We recommend it as an addition to the existing frameworks
and as a strengthened underlying concept for change, rather than as the sole solution to
enhanced policymaking and results in SIDS. This will make the difference, we believe,
between surviving and thriving.
The case of the SIDS is illustrative for all nations. It makes explicit a global truth that is
too often ignored by large, fast-growing developing nations, as well as by the international
community, excited by the prospect of the rise of significant new emerging economies,
technologies and opportunities afforded by globalisation. The impact of the crisis is not
about income levels, trade, the world of finance, or the changing balance of economic power
between nations. It is, first and foremost, about people and societies, about their vulnerability
to and ability to recover from events in a wider world, where their voice and their ability to be
taken into account at the high tables of decision-making is limited, if not negligible.
28 International Policy Centre for Inclusive Growth
APPENDIX 1
TABLE 10
Response Measures Undertaken in Response to the Global Economic Crisis by Selected SIDS
Country Response measures
Antigua and Barbuda
No special relief measures except to retain certain key social protection measures of
School Uniform Grant
School Meals Programme,
Home Improvement Grant,
Poverty Alleviation Grant,
GRACE Programme (for the elderly and eligible),
Job Training initiatives,
Senior Citizens Utility Subsidy Programme
Peoples Benefit Programme implemented by PDV Caribe and funded with resources made
available through the Petro Caribe arrangement.
Fiscal Consolidation measures to reduce expenditure and raise revenue
Barbados
Removal of subsidy on fuel, allowing prices to pass through to the consumer.
Implementation of programme to allow employers to defer a portion of their NIS contributions for
employees for one year, to be repaid at a low interest rate in exchange for their agreement to
maintain the workforce levels.
Companies/contractors who owe taxes and contributions will still be eligible to tender for
government contracts once an agreement for payment has been made. Persons in arrears are also
allowed a 50 per cent reduction in outstanding taxes and contributions.
Companies/contractors who are owed by Government can recover up to 90 per cent of the monies
owed to them by government through an arrangement with the Central Bank, which allows the
Commercial Banks to provide these loans.
Providing support to the Tourism sector, through a Tourism Unemployment Relief Fund of 25 million
Barbados dollars.
Dominica
Increase in tax free allowance from US$ 15,000 to US$ 18,000 per annum
Reduction in tax rates by 2 per cent points on all tax brackets. Cost: US$ 4.9 million (Jan - June)
Tax exemptions on pensioner`s income
10 per cent increase in allowances granted under social assistance programmes, covering: young
people; clothing and transportation allowances for disadvantaged students; grants to institutions
that care for disadvantaged persons.
50 per cent increase in amounts paid as assistance raising monthly assistance from EC$ 100 to
EC$ 150 (from July 2008)
public assistance raised to centenarians - EC$ 500
(24 beneficiaries)
Initiative to improve targeting of subsidies
Red clinic' - weekly assistance to petitioners
Montserrat
Cutbacks in government expenditure across the board, including expenditure on social protection
and health budgets
Cutbacks in training and development budgets
Continuing construction projects as a way of keeping economy growing
No public sector layoffs or salary cuts
Support to the tourism sector – tourism challenge fund
Increased attention to the deepening and widening of the social safety net to take care of the poor
and vulnerable
Government is pushing a return to agriculture as a means of to providing food security
Working Paper 29
St. Kitts and Nevis
With effect from January 2009, small hotels were exempted from duty and consumption tax
on food and beverage. These concessions were later extended to the restaurant sector
Nevis established a Tourism Contingency Fund (which is funded by an additional 1 per cent
charge on hotel accommodation tax
Additional concessions made in respect of small hotels – such as duty free concessions for
refurbishment.
All expenditures in Nevis have to be approved by the Ministry of Finance (an interim measure) to
ensure expenditure control
All social programs that are supportive in nature have been maintained, but some
developmental line items have been cut from individual Ministries and department.
The Social Development Ministry has started making strides towards improving targeting.
Introduction of the YES programme.
In Nevis, capital infrastructure projects introduced, funded by social security loan
Fiji
Removal of customs duties and VAT on several basic food items
Increased the income tax threshold
Provided subsidies to bus operators.
Instituted a significant increase in Government spending on education now accounting for
one sixth of total current spending, followed by spending on public order, safety and defence,
and economic affairs.
Increased expenditure for improving public infrastructure
Reduction in the company tax (expected in 2009 to counteract downward pressures on
growth from the financial crisis)
Incentives for investment including tax free holidays and tax free zones
Eased monetary conditions
Currency devaluation
Institution of a “free bus fare” programme for families with incomes less than F$ 15,000
per annum but this is still being organised, it is scheduled to take effect in February 2010
Samoa
Increased spending in education
Eased monetary conditions
Reduction in lending rate from 7.8 per cent to 5 per cent in early 2009
Government is instituting a “School Fee Grant Programme”, but again this is still in the
final design stage and has not yet been fully implemented
Solomon Islands
Improve tax administration and widen the tax base - the reference price of logs was revised
to reflect international market prices and ad hoc tax exemptions were narrowed
Control inflation through the tightening of monetary policies
Solomon Islands announced a 35 per cent reduction in all non-essential non-staff costs
as royalty revenues from the logging industry declined sharply in late 2008 and early 2009
Vanuatu
Strengthen land registration and titling needs to be strengthened, operations of public-sector
enterprises improved and infrastructural bottlenecks resolved to improve investment both
local and foreign.
Focus on public/private sector partnerships
RBV reduced rediscount rate to 6 per cent
Substantial cuts to school fees for primary level
For the Caribbean, reproduced from Junge, 2009/ summarised from Economic crisis PSIA Reports; For the Pacific,
summarised from ESCAP 2009.
APPENDIX 2
TABLE 11
Recent Disasters in SIDS (1990-2009)
Country Type of Disaster Date of Occurrence Impacts Costs to GDP Source
Antigua and
Barbuda Hurricane Luis 1995
70 per cent of houses were damaged or destroyed on Barbuda, and
nearly half of the houses on Antigua were eradicated. Much of the
islands experienced power outages and disrupted water systems.
In all, 3 people were killed, with 165 injured and 1,700 people in
shelter and leaving 3.200 homeless.
The government estimated
a damage total of US$
350 million
Caribbean – Hurricane Luiz Sep
(UN DHA Situation Reports 1 – 10)
Hurricane Georges 1998
Strong winds caused severe property damage, mostly caused to
roofs. 10-20 per cent of houses were greatly impacted, including
three schools. High winds during the passage of the hurricane
downed telephone and power lines, causing loss of communication
and power across much of the island Between Barbuda and
Antigua, Georges killed 2 people and left 3,800 homeless.
$159.9 million http://wapedia.mobi/en/Hurricane
_Georges
Hurricane Jose 1999
Across the Island the storm left one person dead, 18 hospitalised
and over 500 homeless. 815 houses suffered roof loss ranging from
partially damage to completely destroy. The telephone and
electricity service was also disrupted, with approximately 50 per cent
of the telephones out of service and 90 per cent of the island without
electricity.
- Antigua and Barbuda:
Hurricane Jose.
Hurricane Fabian 2003
The hurricane produced storm surge damage in Antigua and
Barbuda, where some boats were slightly damaged. - Oficina Nacional de
Meteorología, Centro de
Información Huracanes
Hurricane Omar 2008
It was assessed that approximately 5,160 houses sustained flood
damages. The intense rains caused damages to roads in several
areas. Meanwhile the agriculture sector and coastal areas suffered
severe damages, as crops were lost and fishermen traps were
completely destroyed by the passing of the storm.
Damages in Barbuda were
estimated at US$ 18 million. Hurricane Omar Antigua and
Barbuda Tropical Cyclone Report
Barbados
For more events:
http://74.125.47.132
/search?q=cache:o
oud46s5r14J:www.i
slandvulnerability.or
g/BarbadosEventsB
oruff.doc+Barbados
+flood+2004&cd=1
&hl=pt-
BR&ct=clnk&gl=br&
client=firefox-a
Hurricane Klaus 1990 Flooding from the rainfall blocked a few roads and forced a few
families to move to safer areas; lightning from the outskirts of the
storm left a portion of the island without power. - Storm Klaus Bears Down on
Caribbean, Hurricane Warnings
Issued
Hurricane Janet 1995
Janet passed just south of Barbados on September 22, the first
hurricane to strike the island in 57 years; maximum winds on the
south side of the island were estimated by locals at 110-120 mph.
There were 38 deaths reported on Barbados.
- 1995 Monthly Weather Review
Hurricane Joyce 2000
Barbados experienced the highest sustained winds Joyce brought to
any land area. There, the winds were 35 mph (60 km/h), gusting to
45 mph (70 km/h). Neither Barbados, Trinidad and Tobago, nor
Grenada reported serious effects from Joyce.
- Tropical Cyclone Report
Hurricane Joyce
Hurricane Ivan 2004 - $5 million in total direct
damage http://wapedia.mobi/en/Hurricane
_Ivan
Flood 2004
Three days of heavy rainfall caused flooding and landslides in
Northern Districts. Flash flooding in Northern districts. Flood waters
reached as high as 4 feet in Sunset Crest , St. James; Persons
rescued from vehicles.
Dominica
Hurricane Klaus 1990 On Dominica, winds from the hurricane damaged power lines and
downed trees in the northern portion of the island - Storm Klaus Bears Down on
Caribbean, Hurricane Warnings
Issued
Hurricane Luis 1995
Dominica experienced between 60 per cent to 80 per cent damage
to the banana crops. Luis claimed the life of a fisherman in the
raging seas. While overall damages was fairly minor, Luis left 1.000
homeless and property damage was estimated at US$ 47 million
- Dominica – Hurricane Situation
Report no. 3
Hurricane Dean 2007 Dean killed three people and devastated banana and sugar crops a
day earlier as it crossed small eastern Caribbean islands. ~$162 million Hurricane Dean Gains Caribbean
Strength
Montserrat
Hurricane Hugo 1989 90 per cent of all structures were destroyed in the British overseas
territory, including the island's hospital and virtually all the homes of
its 12,000 residents. Tourism and agriculture were also severely hit. US$ 240 million in damages Commonwealth Secretariat —
Montserrat
Soufriere Hills volcano 1995
n July 1995, Montserrat's Soufriere Hills volcano, dormant
throughout recorded history, rumbled to life and began an eruption
which eventually buried the island's capital, Plymouth, in more than
12 metres (39 ft) of mud, destroyed its airport and docking facilities,
and rendered the southern half of the island uninhabitable. Following
the destruction of Plymouth, more than half of the population left the
island due to the economic disruption and lack of housing.
- Montserrat Volcano Observatory
St Kitts and Nevis
Hurricane Luis 1995
Some infrastructure of Saint Kitts and Nevis were damaged, with
troubles especially occurring to the poor water system. Luis caused
minor to moderate house and crop damage amounting to US$
197 million
- Wikipedia
Hurricane Georges 1998
While passing over St. Kitts, downing power lines, telephone lines,
and trees across the island. Lack of electricity resulted in damage to
water facilities, as well. George's high winds caused extensive
property damage, damaging 60-85 per cent of the houses on the
island, and destroying 25 per cent of homes leaving 1/5 houses
uninhabitable. Rainfall and debris killed several hundred livestock
and seriously damaged coconut trees, amounting to US$ 2.5 million
(1998 USD) in agricultural damage.
According to a preliminary
damage assessment
conducted by the St. Kitts
National Emergency
Management Agency, total
damage equals US$ 445
million.
St. Kitts National Emergency
Management Agency
Fiji Fijian Military Coup 1987 1987 and 2000
In 1987, soldiers were responsible for two military coups, and in 2000,
the Military organised a countercoup to quash George Speight's
civilian coup. Since 2000, the Military has had a sometimes tense
relationship with the Qarase government, and has strongly opposed its
plans to establish a Commission with the power to compensate victims
and pardon perpetrators of the coup. Among other objections, the
Military claims that its integrity and discipline would be undermined if
soldiers who mutinied in the 2000 upheaval were to be pardoned.
Tropical Cyclone Kina 1992
There was widespread damage along the Coastal Area. In several
points of the country, electrical power and the telephone system has
been affected. Problems with water contamination were also related
as well with floods.
The Government estimated
a damage of 100 million
dollars.
http://www.reliefweb.int/rwarchive
/rwb.nsf/db900sid/ACOS-
64DDYY?OpenDocument&rc=5&
emid=ACOS-635P39
Niño Southern Oscillation
(ENSO) 1997/98 Losses in sugar cane industry around FJ$ 104 million while other
agriculture losses including livestock death amounted to FJ$ 15
million -
Climate Change and Food
Security in Pacific
Island Countries
Tropical Cyclone Paula 2001
Although it does not appear to have caused any widespread severe
damage during its passage across Fiji, the cyclone worst affected
the Yasawa and Mamanuca Group in the Northwest, Southwestern
Viti Levu, Kadavu, parts of Lomaiviti and the Southern Lau Group.
- http://www.cidi.org:8080/disaster/
01a/ixl119.html
Tropical Depression 10F 2004 The storm was given the number 22P by the Joint Typhoon Warning
Center. It was responsible for causing severe flooding to Fiji and at
least ten deaths - The South Pacific and southeast
Indian Ocean tropical cyclone
season 2003-04
Cyclone Daman 2007 Cyclone Daman brought heavy rain which caused floods and
landslides within Fiji's northern division. This led to several
international and domestic flights being canceled on December 7.
The total cost to Fiji from
Cyclone Daman was F$
500,000 (2007) Seasonal Summary 2007-08
Cyclone Gene 2008
FJ$ 45 millions in damages to agriculture, infrastructure, utilities and
property. It grinded Fiji to a halt leaving half the country without
power and taps running dry for a large part of yesterday. It also left
four people dead.
The government had to
provide FJ $1.7 million
worth on food rations.
Climate Change and Food
Security in Pacific
Island Countries
Samoa
Cyclone Ofa 1990 Cyclone Ofa caused extensive damage and destruction in Western
Samoa with considerable loss of life. The monetary value of the
damage has been set in the millions of dollars. - Survey of Cyclone Ofa Damage
to the Northern Coast of Upolu,
Western Samoa
Tropical Cyclone Val 1991
The cyclone raged for approximately four days and severely stripped
90 per cent of the island, causing 13 deaths and destroying about
half of the island's coconut trees, resulting in a tremendous blow to
the country's economy.
- Wikipedia
Pacific Islands Tsunami September 2009
At least 143 people were killed in Samoa, 22 people in American
Samoa and 7 people on Niuatoputapu, Tonga. 310 people have
been reported as injured, five are missing and
about 3,200 people (640 families) have been left homeless in
Samoa (OCHA).
Reconstruction costs in
Samoa are estimated at
US$ 150 million.
The South Pacific Island
Earthquake and Tsunami
Solomon Islands Ethnic Conflicts 1998
In late 1998 groups of militant youth on the main island of
Guadalcanal embarked on a violent campaign of intimidation
against settlers from other parts of the country and, in particular,
those from the neighbouring island of Malaita. Over 20,000
people were displaced from their homes in rural Guadalcanal. In
response an armed Malaitan group - the Malaitan Eagle Force -
was formed in the national capital, Honiara, and fighting broke
out between the militant groups. The conflict has been
represented widely as the outcome of `ethnic tensions' between
the people of Guadalcanal and Malaita.
Armed conflict in Solomon
Islands, which began in
October 1998, has resulted
in a rapidly deteriorating
human rights situation, with
civilians suffering abuses by
all sides, including
abductions, torture, rape
and killings, forced
displacement, looting and
burning down of homes.
Introduction: Conflict and
peacemaking in Solomon Islands
http://rspas.anu.edu.au/papers/m
elanesia/conference_papers/200
1/01_Solomons_Dinnen_Intro.pdf
Solomon Island: a forgotten
conflict
http://www.amnesty.org/en/library
/info/ASA43/005/2000/en
Tropical Cyclone Beni 2003
Vanuatu 1998 Crisis 1998
Tropical Cyclone Paula 2001 the Government reports damage to 45-50 per cent of houses and
gardens, 35 per cent of water supplies, 20 per cent of schools, 15
per cent of medical centres and 25 per cent of other infrastructure. - http://www.cidi.org:8080/disaster/
01a/ixl119.html
Cyclone Zoe 2002
Vanuatu was inundated with seawater with villagers collecting fish
from their village greens. - Wikipedia
Tropical Cyclone Ivy 2004
Tropical Cyclone Ivy has affected more than 54,000 people (or a
quarter of the national population). Over 95 per cent of water
storage facilities, water sources and systems in the affected islands
were damaged.
- Monthly Global Tropical Cyclone
Summary February 2004
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NOTES
1. The focus countries for the paper are: i) for the Pacific: Fiji, Kiribati, Samoa, Solomon Islands and Vanuatu; ii) for the
Caribbean: Antigua and Barbuda, Barbados, the Commonwealth of Dominica, Montserrat and St. Kitts and Nevis.
2. United Nations Assembly. (1994). Barbados Programme of Action A/CONF.167/9, Annex II. Accessed from
<http://www.sidsnet.org/docshare/other/BPOA.pdf>.
3. The Small Island Developing States Networking (SIDSnet) is one of the effective means of building such partnerships at
regional and global levels through the Internet and related information communication technologies (ICTs). SIDSnet was
initiated in 1997 as a project of the Alliance of Small Island States (AOSIS), a coalition of 43 States drawn from Caribbean,
Africa, Indian Ocean, Mediterranean, and Pacific. SIDSnet’s main goal has been to utilise electronic networking to link
SIDS to support the implementation of the sustainable development objectives of the Barbados Programme of Action
(BPoA). The project was initially funded by Sustainable Development Networking Programme (SDNP), Technical
Cooperation among Developing Countries (TCDC) agencies, and the Bureau for Development Policy (BDP) of the United
Nations Development Programme in conjunction with the Alliance of Small Island States (AOSIS). SIDSNet is
unfortunately no longer fully functional.
4. AOSIS is a coalition of 43 States drawn from Caribbean, Africa, Indian Ocean, Mediterranean, and Pacific island states
which initiated SIDSNET and other mechanisms for engagement and joint action by SIDS.
5. Speech by the Prime Minister of Barbados, the Honourable David Thompson, at the Opening of the Special National
Consultation on the Cost of Living. June 17th, 2008.
6. Vanuatu’s resilience/resistance so far to the crisis suggests that sound fiscal policy, proactive measures, constant
monitoring and the build-up of credible reserves can assist governments to weather a narrowing of fiscal space.
7. Increased tension in the household, due to income deficits, could in theory lead to the increased incidence of
gender-based violence (GBV). While no data is available to point to specific increased in GBV, experience in other
crises have shown that medium and long-term stress at the household level can lead to increased violence. Further,
pressures to identify new sources of income could lead to risk-seeking behaviour and risky sexual practices,
contributing to STDs and HIV/AIDS.
8. In St. Kitts and Nevis, also, the crisis has and likely will have impacts on HIV/AIDS programming. Along with rising prices
and rising unemployment and under-employment, HIV/AIDS programming has been threatened as the crisis coincided
with the end of WB funding in June 2009 meaning that government was the majority funding of HIV/AIDS programming.
9. It has long been recognised and accepted in both Caribbean and Pacific SIDS, that measures of consumption and
expenditure are a more reliable methodology for estimating poverty and hardship as compared to income. Most of the
availability poverty data in both the Caribbean and the Pacific come from expenditure and consumption based surveys.
10. Information from Dominica shows starkly that the non-poor are only slightly less dependent on remittances than the
poor—highlighting a little known vulnerability within non-poor households. Remittances were a source of support to 38
per cent of the poor and 35 per cent of the non-poor (Junge, 2009b, sourced from the 2003 CPA results). This also
requires us to adapt our understanding of the non-poor.
11. The specific strategy of the Government of Fiji to reduce the roll of persons on welfare, is perhaps most telling in this
regard. The 2008 Annual Report on Social Welfare, identified a goal of reducing the number of persons qualifying for
family assistance to 20,000 from 26,926.
12. The Eight Point Stabilisation Plan included focus on three elements: stabilisation, stimulus and structural reform.
In respect of Social Safety Nets, governments agreed to support the following measures: (i) Greater coordination and
collaboration within and among countries in the implementation of social protection systems; (ii) Improved targeting of
social protection programmes; (iii) Rationalisation and consolidation of social protection programmes to improve efficiency
and to establish priorities; and (iv) Initiatives geared towards moving persons out of poverty including education
enhancement, training and retraining, temporary work programmes and small business development programmes. There
was also an agreement to ensure that social safety nets in the ECCU were streamlined and targeted as a means of managing
the cost—impact of the social protection mechanisms on member states’ expenditure. More information can be found at:
News Room Press Releases: Communiqué of the 6th Special Meeting of the Monetary Council, St Kitts And Nevis, 18
September 2009. Accessed from <http://www.eccb-centralbank.org/News/press2.asp? pressID=340>.
13. CCRIF is one of the ways the Caribbean region has begun to take a proactive stance against natural disasters.
The CCRIF is a parametric insurance facility, owned, operated and registered in the Caribbean for Caribbean
governments. It insures government risk and is designed to limit the financial impact of catastrophic hurricanes and
earthquakes to Caribbean governments by quickly providing short term liquidity when a policy is triggered. It is the
world's first regional insurance fund, giving Caribbean governments the unique opportunity to purchase earthquake and
hurricane catastrophe coverage not available elsewhere and with lowest-possible pricing.
<http://www.ccrif.org/main.php?main=9>.
International
Centre
for Inclusive Growth
International Policy Centre for Inclusive Growth (IPC - IG)
Poverty Practice, Bureau for Development Policy, UNDP
Esplanada dos Ministérios, Bloco O, 7º andar
70052-900 Brasilia, DF - Brazil
Telephone: +55 61 2105 5000
E-mail: ipc@ipc-undp.org URL: www.ipc-undp.org
... For agropastoral and mixed crop-livestock livelihoods, extreme high temperatures threaten cattle (Hahn, 1997;Thornton et al., 2007;Mader, 2012;Nesamvuni et al., 2012); in Kenya, for instance, people may shift from dairy to beef cattle and from sheep to goats (Kabubo-Mariara, 2008). The most extreme form of erosion of natural assets is the complete disappearance of people's land on islands and in coastal regions (McGranahan et al., 2007;Solomon et al., 2009), exacerbating livelihood risks due to loss of economic and social assets (see Chapters 5, 29;Perch and Roy, 2010). Densely populated coastal cities with high poverty such as Alexandria and Port Said in Egypt (El-Raey et al., 1999), Cotonou in Benin (Dossou and Glehouenou-Dossou, 2007), and Lagos and Port Harcourt in Nigeria (Abam et al., 2000;Fashae and Onafeso, 2011) are already affected by floods and at risk of submersion. ...
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... The most extreme form of erosion of natural assets is the complete disappearance of people's land on islands and in coastal regions (McGranahan et al., 2007; Solomon et al., 2009), exacerbating livelihood risks due to loss of economic and social assets (see Chapters 5 and 29) (Perch and Roy, 2010). Densely populated coastal cities with high poverty such as Alexandria and Port Said in Egypt (El-Raey et al., 1999), Cotonou in Benin (Dossou and Glehouenou-Dossou, 2007), and Lagos and Port Harcourt in Nigeria (Abam et al., 2000; Fashae and Onafeso, 2011) are already affected by floods and at risk of submersion. ...
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