HOW INNOVATION CAN SHAPE A NEW TYPE OF DEVELOPMENT IN SMALL ISLAND DEVELOPING STATES.

• Author: Meddeb, Riad
• Position: ARGUMENTS

INTRODUCTION

Small Island Developing States (SIDS) are some of the most beautiful places in the world, yet they face a distinctive set of challenges. SIDS share common structural and fiscal contexts--including a lack of economic diversification, exposure to the effects of climate change, and issues of inclusion--that pose unique development challenges. However, while SIDS are bound together by these challenges, they also share a real opportunity for innovation, particularly innovation that leverages digital technologies and related assets such as data. This opportunity is founded on certain strengths inherent to SIDS, including agile governance, less legacy infrastructure than their larger country counterparts, and exceptional human capital.

This potential can be seen in the exploration of digital and innovative technologies led by SIDS. One recent example is the case of the Marshall Islands, which is aiming to become a global hub for Decentralized Autonomous Organization (DAO) incorporations. A DAO is a type of organization that encodes all of its rules and governance in a digital format. To push forward this agenda, the Marshall Islands has become the first sovereign nation to recognize DAOs as legal entities.

Over the last two and a half years, the COVID-19 pandemic entrenched and accelerated the potential of digital innovation for many countries, including SIDS. Of importance here is the role of these tools for public service delivery. For example, during the pandemic, countries with digital IDs and databases for government payments reached 39 percent more beneficiaries than countries without these digital assets. (1) However, innovation is also crucial for the longer-term benefit of economies and societies.

Although the pandemic accelerated digital adoption, the importance of these tools was in fact already increasing prior to the COVID-19 pandemic. The Fourth Industrial Revolution--the combination of cyber and physical tools and systems being explored across numerous sectors--is continuing to shape economies and societies around the world. (2)

Innovations ranging from AI and 5G to initiatives utilizing 3D printing have enormous scope to accelerate sustainable development. Similarly frontier concepts, such as the Metaverse, although underexplored and unproven at scale, could also fundamentally reshape the role of governments, the private sector, and civil society. These advances could one day even make geographic borders--and geographic size--less relevant.

The importance of innovation for SIDS cannot be understated, particularly recognizing the very tangible and immediate threats of climate change. These urgent threats could propel SIDS to become leaders in leveraging innovation to demonstrate a truly inclusive Green Transition, using technology to advance prosperity, sustainability, and social equity. Evidence shows that, if managed well, the transition can be a powerful driver in creating green jobs, promoting social justice, and eradicating poverty' Innovation, therefore, can be SIDS' greatest asset and opportunity.

WHY WE NEED A NEW TYPE OF DEVELOPMENT

The 17 Sustainable Development Goals (SDGs) highlight the scale of the development challenge. These are often considered "wicked problems:" multifaceted and multidimensional issues, cutting across social, economic, and cultural lines, which demand interdisciplinary thinking. The COVID-19 pandemic has exacerbated this challenge. Under a "COVID-19 baseline" scenario identified by the United Nations Development Programme (UNDP), an estimated 41 million people in low-and-medium income countries could be pushed into poverty by 2030. However, estimates now predict that, post-pandemic, as many as 169 million people could be driven into extreme poverty in these countries by 2030. (4)

In addition, many small states suffer from low economic diversification that could exacerbate these outcomes. These countries are heavily dependent on tourism, service exports, and a handful of other--often vulnerable--industries. (5) This can have significant and negative multiplier effects. For example, youth unemployment rates exceed 50 percent in many SIDS, (6) which may contribute to future poverty and cycles of unemployment. However, innovation of all types can help small states to overcome some of the historic and structural barriers incurred by their particular geography, in particular by driving economic diversification and creating new economic opportunities for SIDS populations.

Although technical innovation can advance development in SIDS, there are also several challenges related to technology adoption to keep in mind. For one, access to technologies remains low in many SIDS. Around three billion people globally still lack internet access, while many lower-income countries are ill-prepared to leverage the potential of frontier technologies. (7) The risks and challenges of technical innovation--including unemployment arising from the automation of jobs, inequality and discrimination within data, and application of fair intellectual property rights--may also disproportionately affect developing countries, including and especially SIDS. Venture capital and other funding penetration is also highly variable across regions, while the intensity of research and development, including patenting rates, is strongest in higher-income countries. (8) For example, in 2013, only seven scientific and technical journal articles were published for every 1 million people in the least-developed countries in Africa, compared to 1,100 journal articles per 1 million people in the OECD. Additionally, most innovation literature in the sustainable development context focuses on a handful of the lowest-income countries. (9) This may entrench inequities further by placing other lower-income countries within this homogenized group, denying them the specificity of their own experiences and contexts.

The scale and importance of these challenges demands new solutions. Existing tools and approaches will continue to be important, but innovation in development is crucial. This includes leveraging new data-driven processes to identify learning and impact, building responsive and agile regulation and governance, exploring the potential of technology to tackle marginalization, implementing true public-private partnerships to achieve scale and sustainability, and ensuring that research and development (especially for frontier technologies) are driven by the needs, realities, and aspirations of citizens.

Digital technologies, and innovation more widely, have both broadened the potential for development and expanded the number of actors involved. Development is no longer solely driven by governments or multilateral organizations. The private sector is now a crucial development leader. (10) Public-private partnerships and private-sector solutions have become essential tools in the international development toolkit. Development is also no longer solely about size or scale, with targeted interventions and agile governance playing key roles. In this emerging context, SIDS are key agents of change and have the potential to move...