Once again, people in Vanuatu are rebuilding their homes after two cyclones hit the nation in the first week of March. It’s a tragic reminder of the vulnerability of small island developing states and the way that human-induced climate change and natural disasters can set back livelihoods, health and well-being.
For many years, Pacific governments have been frustrated that traditional measures of development do not adequately capture these vulnerabilities. For the Organisation of Economic Cooperation and Development and multilateral development banks like the World Bank and Asian Development Bank, decisions about allocating development finance have long been determined by measures such as the Gross National Income (GNI) of a country.
Many Small Island Developing States (SIDS) in the Pacific, Caribbean and Indian Ocean continue to lose access to concessional loans and development assistance because economic criteria like GNI are the core measure that determines eligibility for assistance. In response, the United Nations is working on new ways to measure vulnerability, such as a Multi-dimensional Vulnerability Index (MVI).
Rabab Fatima of Bangladesh is the UN High Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States. Speaking in March at the 5th UN Conference on the Least Developed Countries in Qatar, she described the MVI as “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 waters rise.”
Going beyond such measures as gross national income and gross domestic product (GNI/GDP), a new index would look at vulnerability and resilience from different dimensions: environmental (including climate change, natural hazards and disasters); economic (such as financial or trade shocks); and social (with impacts driven by pandemics, displacement and labour mobility).
Bridi Rice, CEO of the Development Intelligence Lab in Canberra, told Islands Business, “the idea of a vulnerability index comes from the concept that measuring a country’s Gross Domestic Product or Gross National Income is a pretty poor measure of well-being. GDP is a very blunt instrument to tell donors which country they should give money to, and a very old-fashioned measure of development or poverty.”
“For countries that don’t fall into the neat GDP/GNI measure, you get a lot of churn,” Rice said. “That means people will get out of poverty, but may fall back into poverty a year or two later after a disaster. The vulnerability index is saying something different. It looks at their vulnerability – they are only a moment away from a cyclone or a moment away from a blocked trade route that means they can’t get food into their nation.”
Graduating, then suffering
Within the global system, 46 countries are ranked as Least Developed Countries (LDCs), including three in the Pacific: Kiribati, Tuvalu and Solomon Islands.
This designation is a way of ensuring that poorer nations get better access to concessional loans, official development assistance (ODA) and technical support from United Nations agencies and other donors. However, some SIDS graduate from LDC status because they have high levels of per capita income, due to significant levels of development aid but small populations. Moving out of LDC status means they can lose access to significant sources of development finance.
Samoa graduated from the official list of LDCs in 2014, after meeting the thresholds that measure income (GNI per capita) and Human Assets (HAI). Vanuatu also graduated in December 2020. The Melanesian nation was due to change status earlier than 2020, but Cyclone Pam devastated the islands in 2015, leading to a decision by the UN General Assembly to grant a three-year extension before graduation.
Last month, of course, Vanuatu was again hit by two cyclones and an earthquake in one week, destroying infrastructure and damaging livelihoods – a striking example of why vulnerability rather than just GNI/GDP should inform decisions about overseas assistance.
For many years, the Alliance of Small Island States (AOSIS) has argued that “the peculiar vulnerabilities of small states are best assessed by the Multi-dimensional Vulnerability Index. It will help LDCs graduate sustainably from this status, so they can reap the benefits of truly being a part of the global economy.”
Honiara is next in line. A 2018 UN resolution determined that Solomon Islands will graduate from LDC status on 13 December 2024, six years after the adoption of the resolution. For Susan Sulu, Permanent Secretary of the Solomon Islands Ministry of National Planning, this timetable doesn’t address ongoing challenges: “Graduating the Solomon Islands in 2024 is not in keeping with our sustainable development pathway. Our graduation must be delayed until support systems like MVI come on stream.”
Samoa takes the lead
The call for the creation of a globally accepted vulnerability assessment was first made at the 1992 UN Conference on Environment and Development in Rio de Janeiro. Three decades later, there are signs of progress.
At the United Nations, Pacific Island embassies coordinate through the Pacific Small Island Developing States (PSIDS) group. They also participate in the wider alliance AOSIS, to campaign on oceans, climate, development and disarmament. In January, Samoa’s Permanent Representative to the United Nations Fatumanava-o-Upolu III Dr. Pa’olelei Luteru officially took up the position of AOSIS Chair. Palau’s UN Ambassador Ilana Seid replaced him as PSIDS Chair and the Micronesian nation will step into the role of AOSIS Chair at the end of Samoa’s current two-year tenure.
On behalf of these networks, Samoa has been promoting action on the MVI within the UN system and amongst donors. As he started his new role with AOSIS, Ambassador Fatumanava stressed that “the MVI is extremely important for Small Island Developing States.”
“One of our greatest challenges at the moment is that we are not at the same level of access as our developed partners, so being able to access concessional financing is extremely important,” he said. “Secondly, there is the issue of debt. We’re going to find ourselves in a situation where we have to make choices between our Sustainable Development Goal obligations or meeting our debt obligations, so it’s a very difficult situation.
“I’m hoping this MVI will also lead us to the establishment of a sustainable debt regime. I think this is extremely important for us. The third potential use of the MVI is to help our donors and partners in terms of their allocation. At the moment, it is in favour of GNI/GDP, but it doesn’t take on board vulnerabilities and all these other issues and so I’m hoping that it will have an impact.”
This Pacific leadership of AOSIS comes at a crucial time, after debate about the MVI ramped up throughout 2022. Last year, the United Nations appointed a ‘High-level Panel for the Development of a Multi-dimensional Vulnerability Index’, co-chaired by Norway and Antigua and Barbuda. Samoa’s Ambassador was appointed as the sole PSIDS representative amongst the 12 members of the UN panel.
In August 2022, the High-level Panel released its interim report, acknowledging that “many countries, notably SIDS, are much more vulnerable than their income levels would suggest… because of costs associated with remoteness from international markets such as of high import/export costs and irregular international traffic volumes, as well as diseconomies of scale.”
The report echoed concerns from island states that the tremendous social and economic fallout from the COVID-19 pandemic also contributed to high indebtedness, disrupting supply chains and generating financial shocks.
Last September, Samoa’s Prime Minister Fiame Naomi Mata’afa took the issue to the floor of the UN General Assembly. She told delegations that “the global financial system is morally bankrupt, and it favours the rich and punishes the poor. This must change. The approval and effective implementation of the Multi-dimensional Vulnerability Index will be a move in the right direction in addressing this imbalance and make the global financial architecture fit for purpose, by tackling the SIDS’ financing gaps.”
For Prime Minister Mata’afa, a universal MVI “is a tool that provides for a richer lens on vulnerability and resilience – hence its adoption and full implementation is critical for our economic recovery.”
Development analyst Bridi Rice agrees that “an index is the right way to go – we should be thinking about development in a way that takes account of social and environmental factors as well as economic factors. However, there is a very long way to go before a vulnerability index replaces GDP amongst many development banks and international agencies.”
Last month, 47 Heads of Government, 130 ministers and nearly 5,000 delegates gathered in Qatar for the fifth global meeting of Least Developed Countries. Seizing this opportunity, the UN High-level Panel presented details of its work on MVI to the conference, seeking to expand diplomatic support for a resolution to go before the UN General Assembly this year. Alongside the campaign for an ICJ advisory opinion on climate change, PSIDS diplomats will be pushing for action on development finance, even though many donors are more focussed on funding the war in Europe and geopolitical competition in the Indo-Pacific region.
The clock is ticking. Samoa hosted the Third International Conference on SIDS in Apia in 2014, which adopted the SAMOA Pathway as a development roadmap. In 2024, the Fourth International Conference on SIDS will be held in the Caribbean, so action on development finance this year is important. As Samoa assumed the role as AOSIS Chair, Prime Minister Mata’afa stressed: “AOSIS’s continued and strong advocacy is essential to the MVI being implemented by partner countries, international financial institutions and multilateral development banks.”
