Second Global Biennial Conference on Small States: Outcome Document

Marlborough House, London, 17-18 September 2012

Introduction

1. The Second Global Biennial Conference on Small States took place at Marlborough House in London on 17–18 September 2012. The conference, convened by the Commonwealth Secretariat, followed the successful Biennial meeting in 2010 whose outcomes were endorsed by Commonwealth Heads of Government at their meeting in Perth in October 2011.
2. Opening the conference, the Commonwealth Secretary General, Mr Kamalesh Sharma, emphasised the unique developmental challenges that small states continue to encounter in addressing their vulnerabilities and building resilience, and the positive efforts that they are making to unlock new development opportunities and enhance growth prospects.
3. The conference brought together 60 participants from 31 Commonwealth and non-Commonwealth small states and British Overseas Territories, as well as experts and regional representatives and other international organisations. The sessions, organised in consultation with the World Bank, were delivered with support from the Governments of Australia and the United Kingdom, which enabled a number of countries to participate in the conference.
4. Participants reflected on the multiple and complex challenges that confront small states in the global economy and reiterated that these are having a profound and adverse impact on their ability to fully and effectively integrate and to secure the benefits from globalisation. They also recognised that despite enormous challenges, there are many opportunities to pursue practical solutions to build resilience in small states, focusing on five key priorities for small states: promoting green growth; tourism and inclusive growth; regional integration; migration and development; and a focus on practical ways to build resilience.

Green Growth in Small States

5. Participants acknowledged that a full transformation to a green economy in small states requires collaborative efforts to build momentum for greater sustainability. Transformation of the energy mix is critical component of green growth in small states. For small island developing states, ocean governance is also important in complementing the opportunities offered by the green economy.
6. Action can be taken in several practical ways to help to facilitate green growth and the transition to a green economy in small states. These include the need for: engagement across a range of line ministries, particularly finance, planning and environment; enhanced policy integration and coherence, which can include efforts to bring sectoral strategies into a national framework and institutional co-ordination mechanisms to support policy integration; and efforts to improve the quality and range of data to support decision making. Participants further highlighted the need for investment in green growth and improved international financing support to catalyse this outcome; behavioural change and public education to enable green growth; a better conceptualisation of the role of the private sector and fuller engagement by the sector; and capacity-building, particularly in priority sectors.
7. Participants also considered there to be several key areas for further action, including: encouraging greater knowledge sharing amongst small states; capacity building to enable the transition to and development of a green economy and the effective management of natural capital. There is also a strong emerging role for targeted research and analysis; consensus-building and advocacy on behalf of small states; and the need to expand collaboration and partnerships in mobilising development financing. Participants encouraged a closer exploration of how best the various components of climate change adaptation could be separated and targeted, including considering options for payment for ecosystem services; and enhancing the visibility of key environmental challenges.

Tourism and Inclusive Growth in Small States

8. The session examined policy options for strengthening inclusive growth in small states through the tourism sector. Participants considered several contemporary challenges of particular relevance to tourism in small states. These include, for many, the dominance of an all-inclusive resort model, cruise ship itineraries, national political economy and local perceptions of what the tourism product might be. Several practical recommendations were suggested for future action. These include a critical need for improved and detailed statistics on the net contribution of tourism to local economies and job creation, including value-added statistics and satellite accounts; and a clear analysis of the potential contribution of a range of markets to promote more inclusive growth. Sectors which, with a stronger policy framework, could make a more effective contribution to sustainable employment and growth were explored. These include yachting, diving, diaspora and home tourism, backpacking and wildlife watching. A wide range of research needs also require to be addressed including an examination of policy options to reduce leakage; tracking of individual spends; review of wider policy frameworks to support improved linkages to other sectors such as agriculture; and an examination of the blockages to creating those linkages. For example, a better understanding is needed of the technology and transport needs related to the provision of agricultural products into the tourism market.

Regional Integration in Small States

9. Given their limited institutional and human capacity, narrow range of exports, small markets, high costs of doing business, and limited financial resources, small states find it increasingly difficult to maintain their place in the global economy. The prevalent information asymmetries, lack of diversification and failure to acquire economies of scale compound the need for small states to pursue regional alternatives to the development and implementation of policies and programmes for both regional and national gains. The conference examined frameworks and practices in regional integration in small states through a review of several differing arrangements pursued in Europe, Caribbean, the Pacific, Asia and Africa. A detailed discussion highlighted that regional trade agreements are an indispensable necessity for small states; countries need to craft their own solutions based on the regional context; integration raises issues related to State sovereignty; and there is a need for both political and operational commitments from all relevant parties, as well as for collective ownership of the process.
10. Participants considered several key issues relevant to the establishment and effective implementation of regional arrangements. These include whether regional integration necessarily requires states to relinquish sovereignty to a regional entity; challenges in measuring the full economic benefits of regional integration, not only in the sphere of trade but in other areas including access to health care and tertiary education; and whether integration amongst small states is constrained by the prospect that they may be too similar for integration to be effective. Participants noted that the prevailing practice of promoting regional integration and measuring its economic benefits through the lens of international trade appears to disregard a number of actual economic benefits that some small states are achieving from regional integration; and that this approach may be limiting the support to regional processes that provide these benefits because they are not fully recognised.
11. Going forward, deeper analysis is needed to develop an analytical framework to better capture and quantify the economic benefits of functional cooperation and the formation of social capital. This can provide tangible benefits to small states by helping to clarify that integration is not just about trade benefits. This is particularly important in the context of contemporary research suggesting that while trade-related gains might be limited, integration can offer a wider set of opportunities to support economic growth and resilience.

Migration and Development in Small States

12. Participants reviewed the outcomes of a consultation by experts on the Development Benefits and Costs of Migration in Small States, which took place in Kingston, Jamaica in July 2012. The session acknowledged that migration remains an important developmental issue in small states and that despite many challenges and developmental costs associated with migration, there are significant benefits that can be captured with effective policy frameworks and an exchange of best practice.
13. There was a detailed discussion on the migration and the remittance experiences of small states highlighting a wide range of both costs and developmental benefits from migration. Small states are continuing to lose a disproportionately larger share of their population to migration, in comparison with larger countries. Similarly, a large portion of outward migration from small states comprises tertiary educated migrants, representing a particularly acute loss of both skills and associated education and training costs. There is a wide variation in the patterns of migration across small states’ regions. While South/South migration is now larger than migration from small states to OECD countries, some three quarters of migrants from small states do migrate to OECD countries.
14. The session shared country experiences in areas such as diasporic investment, brain circulation and the development of new export markets through the diaspora, noting that remittances contribute to household income; help to maintain social safety nets particularly among vulnerable groups including women and children; and help to finance education and health. Challenges include ways to maximise the opportunity presented by steady remittance flows; high costs of remittance transfers, especially in sub-Saharan Africa and small Pacific Island states; and impacts on exchange rates. Remittance transfer technologies are rapidly reducing transfer costs, improving penetration of remittances to rural areas and reducing average transaction values.
15. Practical opportunities to promote the benefits from migration and remittances require further selected analysis and research, strengthening data on the location and composition of diasporas and fostering a wider and more robust process of sharing of information, knowledge and best practices across and among small states.

Practical Ways to Build Resilience in Small States

16. Participants examined macroeconomic stabilisation as a mechanism for building resilience to environmental shocks and security challenges in small states. The focus of the session was on the relative benefits and challenges arising in the implementation of fiscal rules, and in the application of stabilisation programmes of International Financial Institutions. Options for strengthening macroeconomic stabilisation included: quantifying aspects of the natural environment and assessing the cost of natural disasters so that these can be accounted for within national budgets thus overcoming challenges to the fiscal balance from environmental events; attracting private sector involvement in resilience building and developing market-based monetary policy and the role of banks in promoting green investment; and developing institutional capacities within small states to set, monitor and apply fiscal rules. Small island states could also consider the role of regional pool and support mechanisms to address global security matters and build strong collective market responses to economic shocks. Participants sought further work to elaborate advice with respect to appropriate targets for GDP/debt ratios in small states; the role of insurance in addressing shocks; forecasting and early-warning systems.
17. Participants had also affirmed in earlier sessions the importance of a renewed commitment by the international community in seeking practical ways to overcome vulnerability and build resilience through, inter alia, application of the vulnerability index to support resilience building initiatives and crowd in resources to support efforts being made by small states to secure economic growth and diversification.

International Support for Sustained Growth in Small States

18. In an open panel session, participants considered how small states issues might be taken forward in a cohesive and focused manner in international forums and debates. Issues for focus included small states’ efforts to enter and participate in the global economy: addressing practical aspects related to access and building competitiveness; trade finance; and integrated discussions with trade partners. There was also a focus on the development of a new export basket for small states, support implementation of the green economy with a focus on development needs of small states, and address the concern for youth employment, youth development, job creation and the fostering of entrepreneurship. Debt concerns of small states were highlighted and proposals related to debt-for-nature swaps. With respect to vulnerability and resilience, the debate highlighted concerns around graduation and the need for a full consideration of vulnerability indices to strengthen support to small states and provide concessional support where this is needed for long-term stability and development.
19. Participants received a valuable briefing on the UN Secretary-General’s High-Level Panel on the Post 2015 Development Framework. They noted the importance of contributing to the crafting of well-informed and focused goals, and sought concerted efforts to ensure that these address the challenges of small states in the post-2015 development framework. This will include careful efforts to integrate the current post-MDG process and efforts towards the establishment of Sustainable Development Goals following the UN Conference on Sustainable Development held in Rio in June 2012. A wide outreach process will be pursued and small states are encouraged to contribute their priority needs and perspectives to this process.

Next Steps

20. Participants welcomed the on-going and deepening partnership between the Commonwealth Secretariat and the World Bank Group, recalling its genesis in the Joint Task Force on Small States of March 2000. They recognised that there are many emerging opportunities to advance the interests of small states, including through the strengthening of the Commonwealth-Francophonie-G20 relationship; the Commonwealth Heads of Government Meeting of 2013; the 2014 UN Conference on Small Island Developing States; and through consultations to address the emerging global discourse on the post-2015 development framework.
21. Participants agreed that the Commonwealth Secretariat will convene the Third Global Conference on Small States in 2014; and develop a practical programme of work, in collaboration with the Commonwealth’s development partners and other international institutions, in response to the opportunities that have been highlighted at this conference to advance the development of small states.

Marlborough House, 18 September 2012