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Sustainable Development of Small Island Economies

Hiroshi Kakazu
Advisor for Academic Affairs
Okinawa Prefectural Government

Paper presented at an International Symposium on "Small Islands and Sustainable Development" organized by the United Nations University and the National Land Agency of Japan.

Issues related to insular economies are described in terms of the small islands. In the Land Agency of Japan, there is a growing tendency to examine national development policies from a broad, borderless type of perspective. If we think of the Okinawa Prefecture, which is located at the southern most tip of the Japanese archipelago, we can see that Taiwan is much closer to this island Prefecture than the mainland island of Honshu. Close to this area we have the Spratlys Islands where there are reports of large oil deposits and a large number of security and sovereignty disputes taking place there. These issues affect us all, not only in the region, but also globally. In Korea and Japan, there are also border disputes focusing on the island of Takeshima. In this respect, the island issues are very closely tied to the land administration of Japan as well as strategic concerns.

The theme of this Symposium is concerned with promoting sustainable development in small islands. As an economist, I have been making economic analysis in the past, but inputs from all disciplines are required to come up with feasible answers to the issues that are faced by small island sustainable development. Agenda 21 is an agenda looking towards the twenty-first century and concerns itself with the inextricable link of environment and development issues. In May 1994, I participated in the Barbados Conference on Sustainable Development of Small Island Developing States, which worked to further promote the issues at stake, having developed an agenda for the international community to have regard to in setting priorities. There were approximately forty-three island nations represented at this conference, all members signatory to the United Nations, which constituted approximately twenty percent of the members of the United Nations so that in that respect, the number was large.

In terms of geographical and demographic concerns, the island nations only comprise a very small percentage. However, in terms of sovereignty over marine resources and geo-politics, the small island nations do maintain a tremendously strategical importance. As such, they are also important for Japan as well, particular in considering the Pacific region.

In discussing the development of small islands, there are a number of factors which need to be taken into account. One of these is the small physical size of the islands. As a result, global warming, for example, would affect greatly the development of the islands. They suffer from economic vulnerability and depend greatly on trade and international economic patterns, with some forty percent of their economies based on trade. The islands focus on exporting specific items, so in terms of trade and examining the costs and benefits of imports/exports, one can see that the foreign exchange earnings often results in a deficit.

Service and transfer incomes from Official Development Assistance (ODA), as well as incomes from tourism, work to cover any losses that may be outstanding. As a result of these in particular, the per capita income is recorded as very high in the small island states. On examining the forty-three island nations that participated in the Barbados Conference, the overall per capita GDP was a little higher than the ASEAN nations. For example, in the case of Nauru, the per capita GDP in 1991 was approximately US$15,000. Singapore, as included among the island nations, also enjoys a per capita income of around US$20,000. The case of Singapore, however, is of course a special one primarily due to its location, invulnerability and government policies. Thus, in terms of the GDP per capita income, the official figures for the island states are high, but the economy itself taken by itself, is extremely vulnerable to changes.

Looking at this vulnerable structure of the island nations, we see that it is very difficult for them to cope with economic fluctuations brought about by surrounding nations. Thus, it is important to think of what could be the best policies that could be followed in order to pursue sustainable development. To some issues, there are answers already developed. One solution is to try to think of developing comprehensive industries, such as integrated industries, but this is different to the concept specialization of industries. Specialization occurs where an island concentrates its efforts on development sugar, coconut, mining or tourism industries. Islands depend on these and others in an effort to boost the economy of the island.

The island itself is an open system, so one must maintain the open system in planning development, otherwise one cannot maintain the same high standard of living of the people. Therefore, service and various production mechanisms, must be geared to the betterment of the livelihood of the people there. However, if one thinks of a complex set of industries developing with diversification and integration, there is a possibility of boosting the economy in another way. There may be concern of the fact that if a country does not specialize, the economy will be downgraded. However, if one takes the perspective of an integrated industrial development particularly in the context of an independent small island, there remains a possibility that such a business policy may lead to positive results. This possibility may exist in considering the issue and concerns over food security.

In Okinawa, for example, a typhoon can damage crops so that people do suffer from famine since transporting food to some of the islands can be very difficult. As a response, the islands are very concerned with maintaining food security and it is an issue which is considered to be top priority, maintaining an even higher priority than economic growth and development. Thus, issues of the food supply would be the primary concern for small islands, especially in the Pacific. Where food security cannot be maintained, then states often resort to ODA and other government aid mechanisms to transport food to the island. The need for economic growth and trade, however, often does influence such concerns and strategies.

If one considers the Fiji islands, Fiji once enjoyed a high supply of rice because they cultivated rice themselves. However, once they concentrated on growing sugar cane for export earnings, they converted the rice fields to sugar cane fields. This resulted in the tilting of the economic structure of the island of Fiji. When we consider the importance of food security, islands need to consider even more closely the consequences of any development strategy. A minimum standard of self sufficiency is required to be maintained, particularly in terms of food supply.

Rather than to resort to import substitution policies, such as raising quotas and building informal non-tariff barriers, we must first think of the optimum export/import balance. I am proposing 'import displacement' as a factor that we have to concern ourselves with.

'Import displacement' is a term I am fostering and perhaps can best be described in an example. Breadfruit, potatoes and yams have been cultivated on these island nations. Particularly the Polynesian islands have undertaken a reform in which they tried to convert the production of indigenous food supply of this nation to a different form of agriculture. As a result, they resorted to import substitution which lead to the production of non-indigenous food such as rice. As rice requires water, there have been subtle influences at the micro-level so that, for example, the people have replaced drinking water with substituted products, such as soft beverages. Children were the first to drink Coca Cola, and eventually this spread to the adults as well. At first, the adults were unable to drink the beverage and actually became physically ill in the attempt! Thus, import substitution has necessary implications for the health of the local people, considering that the local people are not necessarily used to intaking food that people elsewhere are, in fact, accustomed to intaking and exporting to the islands.

Thus, there is a need to think about what has been imported from outside countries and did not serve to the benefit of the islanders, as well as a need to think what should be the best measure to improve the situation. The traditional production technology and methodologies have already reduced in importance, so it will be important to think of another mechanism to try to revive the traditional style of supplying food for themselves on the island. This is what I mean by import displacement.

In looking to the future, we will need to better examine the types of options these islands may have at their disposal to implement a better way of life. An example may be to examine the past utilization of sugar cane supply, but in the case of Okinawa, we have been making use of technology to convert the sugar to produce plastics. Rum is also produced, as well as particle boards. Thus, different types of products can be made from sugar cane, which are all biodegradable. If these types of options are going to be made available, it will be important for the islands to involve themselves in high technology development. The process must begin by examining the natural resources available on the island, and then think of new means and ways of positively making use of these resources. New technology can assist in developing new avenues of product development.

In the case of tourism, many of the island nations are trying to make use of tourism as a service and to earn foreign exchange. However, tourism is generally not environmentally-friendly. Thus, the concept of eco-tourism has arisen. The balance between environment and development is extremely difficult to obtain, but I believe that there is actually a carrying capacity of the islands as to the number of tourists that an island is able to carry. If we are to address the impacts of tourism and develop strategies for sustainable development, we need to analyze this basic capacity as a first step. I was asked by the Marianas to look at ways to try to preserve the ecology of the island, with a view to the impacts of the tourist industry. I advised the Marianas that tourism needed to be limited in some respect, otherwise the whole ecological balance of the island would be severely disrupted. Unfortunately, the person who requested the advice lost his seat in government and could not continue with his policies.

Factors to consider in constructing development plans are the lifestyle of the people, living standards and environment. This is essentially a question for the people of the island to answer for themselves. If they come to enjoy a certain standard of living and the standards degrades on the island, the islanders tend to leave their islands. This leads the remaining islanders to poverty. There is a possibility of this kind of disruptive development taking place on the islands, and has actually happened in a number of them. Therefore, we must be very concerned with the capacity of development. Tourism will need to be limited through cooperative efforts of other islands or some other mechanism. A minimum standard of number of tourists must be established to preserve the ecosystem and to have a continuous sustainable development.

With respect to ODA, I have worked in the Asian Development Bank, assisting in this ODA aspect. From my data and observations, in the case of Western Samoa, for example, as the amount of ODA increases, the amount of savings of the islanders tends to decrease. You need to recall that the ODA's role is to encourage the economy to prosper. In the Caribbean nations, I looked into the economies of Puerto Rico and other nations there and found the same result. The more ODA is made available, the less capacity the islanders have to save. This is an important aspect of ODA where attention needs to be given. It is not profitable to simply increase the amount of ODA without careful planning first. ODA in itself does not save the people of the islands nor lead to a continued sustainable development of the islands.

Another major issue is the national minimum infrastructural requirements. In Japan, the remote islands have minimum facilities available. One island has at least one port; a bigger island would have an airport. Thus, the social infrastructure exists in the islands of Japan, and in this respect, the National Land Agency has contributed in a positive way to the lives of the people. Once the basic infrastructures exist, thought can then be given to economic development. Thus, there needs to be a 'national minimum' on the islands as well. Administrations should try to consolidate the needed socio-economic infrastructures so that the islanders will be able to enjoy the benefits of living there. Networking and information is another aspect of this. The United Nations University initiative on its Small Islands Network is most welcomed in this regard, and I am pleased to assist in its planning.

There is a concern over this networking by the islanders that these networks are dominated by the developed nations and that they will not have a say in the development of such networks. The islanders want to have a different type of network which will be contributory to the development of their island. Thus, we need to be very clear about what can be done in order to try to assist these islands.

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