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26 to 27 November 2018 | By invitation only

The small island developing States (SIDS) are characterized by a high degree of economic vulnerability due to the relatively small size of their economies, often with narrow economic bases heavily dependent on just a few key industries, such as tourism, agriculture or fisheries. Their vulnerability to climate change and the often-devastating effects of natural disasters such as cyclone or tsunamis compound their vulnerability. 

Resource mobilization in such a vulnerable environment is a major hurdle for many SIDS. They face high costs of capital due to their geographic isolation, small markets and economies of scale. Domestic private sector, for example, lack substantial pools of domestic private savings in the form of back deposits, pension funds or insurance funds. In addition, the domestic capital markets are generally very small or non-existent. Access to external private financing is also limited. International commercial banks have small credit lines for SIDS due to the small size of their economies. Compared to other developing countries, SIDS have low shares of external private financing flows from international bank lending and FDI. As a result, many SIDS are heavily reliant on bilateral and multilateral overseas development assistance. 

These challenges have been highlighted by the global community through the 2030 Agenda and the Addis Ababa Action Agenda of the Third International Conference on Financing for Development (AAAA). The United Nations has already embarked on a number of plans of action to support the development challenges faced by SIDS, including the SIDS Accelerated Modalities of Action (SAMOA) Pathway. Such policy issues for SIDS have also been highlighted in ESCAP’s Regional road map for implementing the 2030 Agenda for Sustainable Development in Asia and the Pacific. ESCAP, as a United Nations Regional Commission, is critically placed to assist SIDS in the region in this subject due to its role as an intermediary in implementing the internationally agreed global and regional policy agendas at the country level in support of the United Nations country teams. 

According to ESCAP research and analysis , the region’s financing requirements are tremendous. For the SIDS in Asia and the Pacific, it may cost up to $2 billion per year (6-7% of GDP) to provide for their infrastructure investment needs. The needs are particularly acute in the small island least developed countries (LDCs) such as Kiribati, Solomon Islands, Timor-Leste, Tuvalu and Vanuatu. Furthermore, the focus of the 2030 Agenda for Sustainable Development on social and environmental objectives highlights new dimensions and challenges for mobilization of financial resources by developing countries, especially the SIDS. ESCAP member States are in the process of identifying practical ways to use existing resources effectively and to raise additional resources for the pursuit of the sustainable development goals. 

To tackle these challenges, SIDS of the Asia-Pacific region require greater domestic resource mobilization, complemented by strong international support and development cooperation, to improve tax and other revenue collection. Countries also need to identify additional and innovative financing sources, utilize global and regional initiatives, including climate finance, and in the long term develop a financial system that is efficient, fair and predictable. 

It is important to recognize that a key constraint to realizing these opportunities is the lack of strong financial intermediation mechanisms to bridge long-term financing sources and sustainable development-oriented investments. The SIDS have very limited resources to address their development challenges. They also face limited capacities to attract new investments. While this is due to an absence of well-functioning financial systems and weak governance and institutional structures, the fact that there exist high protectionist sentiments in some developed countries also contributes to the private sector and other finance providers not currently being upbeat in making long-term investments for sustainable development.



for more information, please contact

Macroeconomic Policy and Financing for Development Division +66 2 288-1234 [email protected]
Section on Countries in Special Situations +66 2 288 1234 [email protected]