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Presentation to the meeting, “The vulnerability of SIDS:

Presentation to the meeting, “The vulnerability of SIDS: Enhancing resilience – the role of the private sector, civil society and trade – in the sustainable development of SIDS” Convened by UWICED / UNDP in Dominica September 29, 2003 – October 3, 2003 Presented by: Dr. Michael Witter

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Presentation to the meeting, “The vulnerability of SIDS:

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  1. Presentation to the meeting, “The vulnerability of SIDS: Enhancing resilience – the role of the private sector, civil society and trade – in the sustainable development of SIDS” Convened by UWICED / UNDP in Dominica September 29, 2003 – October 3, 2003 Presented by: Dr. Michael Witter UWI, Mona Assisted by: Ms. Terry-Ann Miller UWI, Mona Presenter: Dr. Witter

  2. Vulnerability: Trends & ProfileSelected Caribbean Case Studies Presenter: Dr. Witter

  3. Vulnerability: Trends and Profile • Background to the study: • Caricom project to develop a vulnerability profile for SIDS • Tracking economic vulnerability as an essential element in the preparation of SIDS for Mauritius • Development of customized indices for tracking the impact of policy on vulnerability as a management tool for individual SIDS Presenter: Dr. Witter

  4. Vulnerability: Trends and Profile • Over view of the presentation • Definition of the index used and the rationale • The challenges of the availability of data and the accessing of that data • Estimates of the index of economic vulnerability in the last decade for 6 Caribbean SIDS • Vulnerability profile – template for SIDS Presenter: Dr. Witter

  5. Vulnerability: Trends and Profile • Definition of the Index used in these estimates • Four indicators have been used to capture • the openness of the economy – exposure – as indicated by the sum of exports of goods and tourism and imports as a proportion to GDP. Because of the dominance of tourism in the hard currency earnings of several Caribbean SIDS, it seemed necessary to include tourism in indicating the exposure of these economies to shocks emanating from the international economy Presenter: Dr. Witter

  6. Vulnerability: Trends and Profile • the concentration of risk among the two of three leading export industries, including tourism, as indicated by the share of the two or three principal (largest) foreign exchange earners in total earnings from the export of goods plus tourism • dependence on imported energy – as indicated by the share of imported energy in total energy consumption. There is a difficulty with this indicator for countries, like Trinidad and Tobago, that import petroleum for processing and re-export as petroleum-based products Presenter: Dr. Witter

  7. Vulnerability: Trends and Profile • external indebtedness – as indicated by the proportion of external debt to the GDP. We have experimented, in the case of Jamaica, with the inclusion of the internal debt as an indicator of indebtedness because of the impossibility of separating the external from the internal debt where the capital market has been liberalized. Even conceptual distinction between external and internal debt is difficult in a country like Jamaica. For the purposes of this exercise we have not included the internal debt. Presenter: Dr. Witter

  8. Vulnerability: Trends and Profile • Weighting of the indicators • We have adopted equal weights for the indicators in constructing the index because: • Ultimately any weighting system entails values judgment as to the relative importance of each of the component indicators, and we have nor reason to believe that any indicator is more important than any of the other chosen indicators Presenter: Dr. Witter

  9. Vulnerability: Trends and Profile • Experiments with different weighting systems have not shown any significant difference in the estimated index except where highly unequal weights, that cannot be justified, are used • Normalization, following Briguglio, so that all the numbers are scaled down to lie between 0 and 1 Presenter: Dr. Witter

  10. Vulnerability: Trends and Profile • Accordingly, the index of economic vulnerability (IEV[1])used is defined as: • IEV = [(exposure) + (concentration) + (energy dependence) + (indebtedness)]/4, • where : [1]EVI already refers to the environmental vulnerability index Presenter: Dr. Witter

  11. Vulnerability: Trends and Profile • exposure = (X+T+M)/GDP • concentration = (Leading exports +T)/(X+T) • energy dependence = (Petroleum imports)/(total energy consumption) • indebtedness = External debt/GDP • X = total exports of goods • M = total imports of goods • T = gross earnings from Tourism Presenter: Dr. Witter

  12. Vulnerability: Trends and Profile • The estimates of the IEV for 6 Caribbean SIDS – Antigua, Barbados, Dominica, Jamaica, St. Lucia, Trinidad and Tobago are shown in the following graphs Presenter: Dr. Witter

  13. Vulnerability: Trends and Profile • Singapore Contradiction/Paradox • Briguglio has pointed to Singapore as the epitome of a high performance economy with high economic vulnerability dependent as it is on international markets. Presenter: Dr. Witter

  14. Vulnerability: Trends and Profile • Perhaps, it is really an apparent contradiction – a paradox – since export led growth that entails increased dependency on a narrow range of industries and/or a narrow range of markets necessarily leads to very high risks associated with those industries and markets. Presenter: Dr. Witter

  15. Vulnerability: Trends and Profile • Conversely, the collapse of traditional export markets without replacement by new industries leads to a decline in openness, and hence a decline in the risks emanating from the international economy, and therefore a decline in vulnerability. Presenter: Dr. Witter

  16. Vulnerability: Trends and Profile • In summary, growth without diversification increases economic vulnerability, and economic vulnerability will decline as the trade sector of economies contracts. Presenter: Dr. Witter

  17. Vulnerability: Trends and Profile • Of course, in the second case – the decline in openness – if GDP is sustained by debt or short-term financial flows, risks due to sudden changes in international credit accessibility, and hence the economic vulnerability will increase. Most likely, social vulnerability will increase with unemployment, poverty, migration of skilled persons, and other factors that contribute to social instability, such as the trade in illegal drugs. Presenter: Dr. Witter

  18. Vulnerability: Trends and Profile • Resilience comes with growth that is: • led by a diversified basket of goods and services for export • accompanied by a relative decline in the import dependence – the so-called import coefficient of the GDP – which in turn requires more intensive utilization of domestic resources Presenter: Dr. Witter

  19. Caribbean Vulnerability Indices Presenter: Dr. Witter

  20. Caribbean Vulnerability Indices Presenter: Dr. Witter

  21. Caribbean Vulnerability Index: Presenter: Dr. Witter

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  50. Caribbean Vulnerability Index: Presenter: Dr. Witter

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