When Small is Vulnerable ...and Big is Not Always Better

Photo: ChameleonsEye/Shutterstock.com

The coming months will be crucial for some of the most vulnerable countries in the world. From May 27 to May 30, the international community will gather in Antigua and Barbuda for the 4th International Conference on Small Island Developing States (SIDS). UN Secretary-General António Guterres has set the bar high: “Small island states do not lack ambition, they lack finance. Developed countries must deliver, honouring the promise of US$100 billion a year and delivering a road map to double adaptation finance by 2025.” 

Only a few weeks later, Landlocked Developing Countries (LLDCs) will meet for their third global conference under the auspices of the UN from June 18 to 21 in Kigali, the capital of Rwanda. The country is hosting the event with firsthand experience: Rwanda is a landlocked country and transportation costs for imports and exports are among the highest in the world, according to the US International Trade Administration. 

This is a fate Rwanda shares with other countries in the world with no direct access to the sea, “which leads to geographical isolation from international markets,” as the Organisation for Economic Cooperation and Development (OECD, an intergovernmental organization) puts it. Its Development Assistance Committee (DAC) counts 32 developing countries in this group where import and export of goods and services need to transit through other countries, generating high trade costs and major logistical and infrastructure challenges. Such high transport costs erode the competitiveness of LLDCs, which spend almost twice as much of their export earnings on transport and insurance services as the average for developing countries. 

Due to the many inherent disadvantages (economic or otherwise) suffered by LLDCs, the majority of them also belong to the additionally dire group of Least Developed Countries (LDCs, see page 10). Outside of Europe, there is not a single highly developed landlocked country and nine of the 12 states at the bottom of the Human Development Index (a UN summary measure of average achievement in key dimensions of human development) are landlocked. Such countries register 6 percent less economic growth than their non-landlocked counterparts, says the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UNOHRLLS). 

The body, established in 2001, today serves 92 vulnerable states: The 47 LDCs, 32 LLDCs (16 of which are in Africa) and 39 SIDS. In total, this group accounts for more than 1.1 billion people. The conference in Rwanda will build on the “Vienna Programme of Action for LLDCs 2014-2024” aimed at accelerating sustainable development with six priority areas: Transit policy; infrastructure development and maintenance; international trade and trade facilitation; regional integration and cooperation; structural economic transformation, and implementation. 

Reviewing the progress to date, the UN arrives at a rather gloomy assessment: “We note with great concern the fragile and highly uncertain global socioeconomic outlook,” an official document stated in November 2023. While acknowledging “some progress to close missing links and expand transport infrastructure” in the past decade, the review states that “road and rail transit networks remain largely constrained both in quality and in quantity.” 

The negative impact on the economy is further exacerbated by the fact that African LLDCs also remain far behind in “fully harnessing the benefits of the digital economy.” Although the number of internet users in landlocked developing countries increased from 29 percent in 2019 to 35 percent in 2021, this is still far behind the world average of 63 percent. What makes matters worse: More than 60 percent of the LLDC’s total population still does not have access to electricity and the rural-urban supply gap remains significant. 

The paper also notes the adverse effects of climate change and warns that “the increasing frequency and intensity as well as the number and scale of environmental disasters and their devastating impacts are undermining” not only the implementation of the Vienna Programme of Action, but also the 2030 Sustainable Development Agenda. 

The main answer to these concerns is money. But the fiscal space of many countries is very narrow and international support also remains behind what is needed. The UN calls for “a significant increase in financing for sustainable development, to the tune of at least US$500 billion per year, to be delivered through a combination of concessional and non-concessional finance.” 

Meanwhile, the SIDS’ gathering in June has already been dubbed “the most important of the decennial conferences to have ever taken place” by the global affairs think tank ODI. Four issues that will need to be addressed are eligibility for Official Development Assistance (ODA), access to climate finance, long-term debt sustainability, and climate and environmental justice. 

The conference will review the Small Island Developing States Accelerated Modalities of Action (SAMOA) Pathway that expanded the mandate of UNOHRLLS in recognition of the significant risk that sea-level rise and other adverse impacts of climate change pose to SIDS. For many of these countries, climate change represents the gravest threat to their very existence. 

The current debate about the future of globalization, free trade and international development funding has special significance for the SIDS. Many of those countries benefited from their integration into the global economy, moving out of export agriculture and into tourism, alongside unorthodox strategies such as offshore finance and high dependence on remittances. While these approaches generated foreign exchange, they are volatile and depend on free flows of human and financial capital. 

Even though they are responsible for less than 1 percent of global greenhouse gas emissions, the impacts of climate change will hit SIDS more rapidly and forcefully than any other group of countries, threatening their survival in an existential way. As early as 2009 the Maldives issued a stark warning with the world’s first underwater cabinet meeting: “We are trying to send our message to let the world know what is happening and what will happen to the Maldives if climate change isn’t checked,” said then President Mohamed Nasheed, adding, “If we can’t save the Maldives today, you can’t save the rest of the world tomorrow.” 

The stunt did not fail to draw attention. The underwater cabinet meeting made headlines around the world. But did it change the course of their fate or that of approximately 65 million people worldwide who are extremely vulnerable to the impacts of climate change? According to the United Nations Development Programme (UNDP), “from 1970 to 2020, SIDS lost US$153 billion due to weather, climate and water-related hazards – a significant amount given that the average GDP for SIDS is US$13.7 billion. For those SIDS whose land lies only 5 meters or less above sea level, projected sea level rise represents a direct threat to their existence.” 

The International Panel on Climate Change (IPCC) understands SIDS’ vulnerability in light of several interconnected risks with grave consequences: SIDS host 12 percent of the global bird population and 10 percent of mammals, yet many species are at risk of extinction. Sea level rise is projected to increase, which will lead to significant flooding and storm surges. For example, the Comoros predicts a loss of 734 hectares of agricultural land and displacement of about 10 percent of the population across the archipelago by 2050. 

Surrounded by saltwater, SIDS’ freshwater supply is especially vulnerable to climate change, affecting these islands’ inhabitants. Forty-four percent of SIDS have reached the water-stress threshold due to urbanization and population growth, combined with longer and more intense droughts. Settlements and infrastructure are increasingly exposed to extreme events in SIDS with sizeable impacts on climate-sensitive industries such as agriculture, fisheries, transport, energy and tourism. These sectors are key to SIDS’ GDP and strain public finances by increasing expenses and the cost of borrowing. For example, tuna stocks are expected to decline due to climate change, causing major economic losses to Pacific SIDS. 

Overall estimated losses are staggeringly high: The OECD speaks of economic losses reaching over US$78 billion, mostly since 2000 and mostly in the Caribbean. The World Meteorological Organization estimates that SIDS have lost US$153 billion since 1970, a number also quoted by the UNDP. When looking at individual losses and damages in specific SIDS, these figures take on another dimension: the World Bank estimates that a natural disaster can cause economic losses equal to 200 percent of GDP, as happened to Grenada with Hurricane Ivan in 2004. 

Temperature increases are set to raise mortality rates among outdoor workers and lead to a greater prevalence of diseases. Climate change will increasingly impact local food systems, affecting food security, increasing levels of malnutrition and leading to higher rates of food-borne and non-communicable diseases. In 2019, Cyclone Kenneth severely damaged the agricultural sector in the Comoros, wiping out 16 percent of its GDP, making the country dependent on humanitarian aid and exacerbating food insecurity. 

Economic growth in SIDS is relatively low compared to other developing countries and highly concentrated in a few sectors. For example, fish exports account for nearly 60 percent of GDP in Kiribati and the Marshall Islands, while tourism makes up 50-80 percent of GDP in the Maldives, Palau and Vanuatu. Compared to other groups, SIDS have significantly higher economic vulnerability, leaving them very exposed to external shocks and continuous economic decline. 

Just like LLDCs, Small Island Developing States are focusing their efforts on mobilizing external funding. Twenty-eight SIDS have fully costed Nationally Determined Commitments under the Paris Agreement adopted in 2015, which in total will require US$287 billion from multilateral climate funds and other sources to implement over the next decade, says ODI. 

Because SIDS are considered “particularly vulnerable” by the Green Climate Fund, a UN entity that assists developing countries in adaptation and mitigation, other climate funds should allow for greater access to climate finance. However, problems persist and SIDS receive on average far less finance for climate resilience than Least Developed Countries. Most finance has long been directed towards large-scale mitigation projects, which SIDS do not generally need. Furthermore, SIDS are generally seen as poor investments as they are small and generate low returns. 

A further issue for SIDS is that existing sources of climate financing are fragmented and have different application processes that make different demands of governments. The introduction of the “loss and damage” concept at COP27 recognizes that SIDS are disproportionally affected by climate change, while having contributed very little to the conditions that are threatening their existence. “SIDS are responsible for only 0.2 percent of the global carbon emission and yet suffer most from the impact of climate change,” the UN says. In light of this, delivery of finance is an increasingly existential concern: Current disaster risk financing mechanisms such as insurance and other instruments do not cover more than 10 percent of losses. 

A possible complementary source of finance is ODA. But here SIDS face two problems. The first is eligibility and concessional financing: taking gross national income per capita as the key measure ignores the distinctive vulnerabilities of SIDS. The second is the allocation of development finance: SIDS receive less than 6 percent, mostly in the Pacific, of all ODA, according to the UNDP. The problem for multilateral development banks and international financial institutions is that SIDS in many ways are different from their usual clients: their financing needs are generally perceived as too small, yet also too risky and they are thought to lack capacity to manage large investments. 

A new approach is currently under discussion at the UN with the possible introduction of a Multidimensional Vulnerability Index (MVI) to help affected countries break free from their current “Catch-22”, as the UN-OHRLLS says: “Most SIDS are not the poorest nations: but their costs are so much greater – and accessing financing is more difficult.” The index will combine gross national income measurement with climate vulnerability, access to finance and debt relief support in order to reflect both economic and ecological vulnerability. 

Such a new index still needs to be fine-tuned and adopted by the UN General Assembly. Even then, only strong buy-in from governments and international development agencies will secure its success. 

Experts are cautiously optimistic. The think tank ODI writes: “The process to establish a MVI has given renewed hope and impetus. It could become a vital tool to help small island nations gain access to the concessional financing that they need to survive the climate catastrophe, to improve their long-term national planning, service their debts and sign up to insurance and compensation schemes that may be their last hope when the water rises.”