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A quarterly magazine.Stimulating, critical andconstructive. A forum fordiscussion and exchangeabout the i ntersection ofindustry and development.

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EditorialThe world’s 39 small island developing states (SIDS) face a unique set ofchallenges due to their small size and often remote location. They are alsohighly vulnerable to climate change and natural disasters.

SIDS tend to have fairly narrow economic bases, limited product andmarket diversification, low economies of scale and a high dependency oninternational trade. Yet, while they have many things in common, thestandard of living among the islands’ populations differs widely, with, forexample, the gross domestic product per capita ranging from US$51,000 inSingapore to US$830 in the Union of the Comoros.

As a follow-up to the United Nations Third International Conference onSmall Island Developing States, held in Samoa in September 2014, thisissue of Making It takes a look at the SIDS’ potential to pursue sustainableeconomic development through steadily raising economic productivity.

Can the SIDS fully utilize their resources – both physical and cultural – togenerate income and employment, while managing their environmentalassets and human resources in a sustainable manner? What is the future fortheir two economic mainstays – fishing and tourism? How can these statesaddress the prospect of the major economic disruptions expected to beassociated with the impact of climate change?

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GLOBAL FORUM6 Letters8 Who will lead the greenrevolution? MarianaMazzucato on the state as a force for innovation and change10 Hot topic: Is fair trade fair?Ndongo Samba Sylla andLarry Attipoe discuss

14 Business matters – news and trends

FEATURES18 Climate change: challengesand opportunities for SIDSKaierouann Imarah Radixbelieves that young peoplewill have to solve the

MakingItIndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat ofthe United Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area orof its authorities, or concerning thedelimitation of its frontiers or boundaries, orits economic system or degree ofdevelopment. Designations such as“developed”, “industrialized” and“developing” are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names orcommercial products does not constitute anendorsement by UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), includingthose who are UNIDO members of staff, andshould not be considered as reflecting theviews or bearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

Contents

Editor: Charles Arthureditor@makingitmagazine.netEditorial committee:Thouraya Benmokrane, Jean Haas-Makumbi, Sarwar Hobohm (chair),Kazuki Kitaoka, Jo Roetzer-Sweetland,and Ravindra WickremasingheDesign: Smith+Bell, UK –www.smithplusbell.comThanks for assistance to ZHONG Xingfei and Laura Gil MartinezPrinted by ImprimerieCentrale, Luxembourg, on PEFC-certified paper –http://www.ic.lu To view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesof Making It, please send an emailwith your name and address tosubscriptions@makingitmagazine.netMaking It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre, P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0, Fax: (+43-1) 26926-69E-mail: unido@unido.orgNumber 17, 4th quarter 2014Copyright © The United NationsIndustrial Development Organization No part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

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problems caused by climatechange 20 Creative industries: awindow of opportunity Keith Nurse explores howcreative industries can be an engine for economicgrowth and a mechanism fordiversifying economies inthe Caribbean and beyond

KEYNOTE FEATURE24 Enhancing productivecapacitiesWhile sustainabletourism and fishing generaterevenue in the SIDS, WUHongbo considers newapproaches with thepotential to increaseproductive activities

Cover illustration: Adrian Hillman/istock

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to sustainable developmentin the Pacific Islands34 Country feature: ArubaTourist-rich small islandwith big energy strategy 38 Good business – Profile of Haiti’s D&E GreenEnterprises

POLICY BRIEF42With more investment,the developing world canlead the way to a low-carbon future44 Reaching scale: start-ups to challenge our assumptions46 EndpieceThe challengesfacing the capital of the Maldives

30 Pacific unity is paying off –in fisheries at least GiffJohnson thinks that unity isshifting control of fisheriesto the Pacific Islands 32 Realizing their potentialCatherine Wilson on whyyouth employment is critical

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Beyond growth-drivendevelopmentFrom peer-to-peer production,to Latin America’s Buen Vivirmovement, to food sovereigntyprojects across the globalSouth, initiatives all over theworld are transcending linearmodels of ‘development’ thatprescribe paths of increasingproduction and consumptionfor the sake of growing grossdomestic product (GDP).These initiatives show that realdevelopment occurs whenpeople have the freedom tobuild on their existingstrengths, unconstrained bypressures to ‘grow at all costs’.

The notion that economicgrowth is purely beneficial toindustrialized andindustrializing countries isincreasingly challenged, evenby economists (e.g., ElliePerkins and Manfred Max-Neef ). As Richard Easterlin hasshown, GDP growth does notnecessarily deliver greaterhappiness. Beyond a certainpoint, GDP growth isassociated with peopleworking longer hours,spending less time with lovedones and neighbours(resulting in the loss of familyand community ties), eatingless nutritious diets, exercisingless, and suffering the physicaland psychological effects of allthese lifestyle changes. Well-

documented in the globalNorth, these trends need notbe replicated to ensureprosperity across the globalSouth.

Moreover, the addiction toeconomic growth is bumpingup against the realities ofecological limits. An economycan never be healthy if it isundermining the integrity ofthe biosphere on which itdepends.

The typical response – thatwe can decouple economicgrowth from environmentaldamage – is fundamentallyflawed. While relativedecoupling has occured,decoupling in absolutenumbers is unfeasible.Professor Tim Jackson hascalculated that, in order tostabilize carbon dioxideemissions by 2050 (at levelsconsidered acceptable by theIntergovernmental Panel onClimate Change), the rate of

technological innovationwould have to be 10 timesfaster than it has been in all ofindustrial history. In a contextof declining non-renewableresources and anticipatedincreases in the size of ourglobal population, absolutedecoupling becomes entirelyunrealistic.

The case of London’s airquality actually highlights acommon misunderstandingabout decoupling. London’sability to deal with its smogproblem is mostly explained bythe international division oflabour, rather thantechnological innovation.Nowadays, most productsconsumed in the UK areproduced overseas, withconsiderable environmentaland social effects where themanufacturing and resourceextraction occur, despite strongefforts towards ‘cleanproduction’.

A focus on decouplingdistracts from the emergingopportunities for prosperitywithout growth. The UnitedNations Secretary-General, forexample, has endorsed GrossNational Happiness as a way ofmeasuring economic success.In this light, we suggest the UNIndustrial DevelopmentOrganization (UNIDO) helppave the way by changing itsgoal from “achieving inclusiveand sustainable industrialdevelopment” to “achievinginclusive and sustainable well-being for all”.●The Post Growth Institute, by email

Divert fossil fuelsubsidiesAssaad Razzouk’s “Where’s themoney?” (Making It, issue #16)is a great article. Yet, what doyou think of the potential todivert the substantial resourcesused to subsidize fossil fuels(and that often fail to benefitthe lower-income households)to climate financing? As fossilfuel subsidies (in the form ofconsumer and producersubsidies – obviously not thosethat are directed to R&D or atmaking generation equipmentmore efficient) generally serveto aggravate emissions, theirreform would already bedesirable from a climatechange perspective. As theyalso make up an enormousamount of governmentspending, their reform wouldfree up a huge amount ofmoney that could then bespent on climate changemitigation and adaptation.

Although those with vestedinterests in the fossil fuelindustry would definitelylobby against reform efforts,there seems to be an increasingawareness regarding theineffectiveness and harmfuleffects of fossil fuel subsidies(see reform efforts in Morocco,Iran, etc). What do you think?●Laurie van der Burg, websitecomment

I couldn’t agree more. As I havewritten elsewhere, “governmentsshould lighten the load on citizens’wallets by phasing out fossil fuel

The Global Forum section of Making It is a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication in Making Itshould be marked ‘For publication’, and sent either by email to:editor@makingitmagazine.net or by post to: The Editor,Making It, Room D2142, UNIDO, PO Box 300, 1400 Vienna, Austria. (Letters/emails may be edited for reasons of space).

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subsidies. Tax payers worldwidepay for climate change twice, onceby subsidizing dirty fuels to thetune of US$1.9trn per year (theconservative estimate from theIMF), then again by footing thebill for extreme weather events,floods and droughts fuelled by achanging climate. Releasing someUS$2trn per year of funding islikely to go most of the way, if notall the way, in paying for solutionsto climate change and foradaptation strategies.”●Assad Razzouk, websitecomment

Manufacturedchange?I’m rather sceptical aboutPeter Marsh’s “fifth new

industrial revolution” (MakingIt, issue #15). His elementsthat power the latestindustrial revolution seem tobe mainly about nichemarkets, clusters, networking,and greater participation ofemerging economies. Hardlycomparable to major shifts indevelopment which saw thecreation of factories,transport, electricity andcomputers!

He argues, “For thosedeveloping economies that inrecent years have been startingto catch up with the lifestylesand standards of living seen inthe well-off, Western nations,the period of change couldwell accelerate the advances.”This assumes continuedgrowth of the emerging

economies on the scale theyhave enjoyed over the pastperiod, which has alreadystarted to slow down.

The Organization forEconomic Co-operation andDevelopment, amongst itspredictions for the worldeconomy until 2060 (OECDEconomic Policy Papers,“Policy challenges for thenext 50 years”), says thatgrowth will slow to two-thirdsof its current rate.

It claims, “In the period to2060, global growth prospectsseem mediocre comparedwith the past, with GDP in theOECD and the emergingG20-countries likely to growby 2.7% in 2010-2060,compared to 3.4% in 1996-2010.”

It goes on, “While growthwill be more sustained inemerging economies than inthe OECD, it will still slow dueto a gradual exhaustion of thecatch up process and lessfavourable demographics inalmost all countries.”

Marsh picks out somecompanies in a good positionto exploit the processes ofchange he identifies, and saysthat companies and countrieswho pay attention to newtechnologies, develop newideas and link up with supplychains and networks will dobetter than others. That doesnot seem to be a revolutionarychange but just good businesssense.●Duncan John, websitecomment

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.

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Green entrepreneurship – what everypolicymaker today seems to want toencourage – is not ( just) about start-ups,venture capital and ‘garage tinkerers’. It isabout the willingness and ability ofeconomic agents to take on risk anduncertainty: what is genuinely unknown.Most of the radical, revolutionaryinnovations that have fuelled thedynamics of capitalism – from railroads tothe Internet, to modern-daynanotechnology and pharmaceuticals –trace the most courageous, early andcapital-intensive ‘entrepreneurial’investments back to the state. Such radicalinnovations did not exist before the stateenvisaged and developed them.Consequently, markets for these newproducts or services had also to be createdand shaped by the ‘visible hand’ of the state.The state can act as a force for innovationand change, not only de-risking theeconomic landscape for risk-averse privateactors, but also boldly leading the way, witha clear and courageous vision. This isexactly the opposite image of the state thatis usually sold: the state is usually cast asinertial – necessary for the basics, but toolarge and heavy to be the dynamic engine.

However, across the globe the countriesthat are leading in green transformationsare precisely those where the state plays anactive role. Historically, it was state fundingand the work of particular state agencies

that provided the initial push, early stage,high-risk funding and institutionalenvironment that could establish importantgreen technologies such as wind turbinesand solar PV panels. Currently, it is also statefunding, particularly through developmentbanks, which is promoting the diffusion ofthose green energy technologies, and thishighlights the fact that states have a role toplay throughout the entire innovation chainand not just in public good areas such asresearch and development (R&D).Therefore, the public sector organizationsinvolved are not just creating the righthorizontal conditions for private sectorentrepreneurs: they are ‘directing’ theirfinance towards the most innovative, risky,and uncertain parts of the green economy.

Need for patient capital Advanced clean technologies, like all radicaltechnologies, have many hurdles to clear.Some hurdles may relate to technicaldevelopment, others are due to marketconditions or competition. Given these

challenges, the long-term financial risk ofsupporting a firm until it can massproduce, capture market share and reacheconomies of scale, driving down unitcosts, is huge. In the innovation game, it istherefore crucial that finance be patient,and be able to accept the fact thatinnovation is highly uncertain and takes along time.

The most visible patient capital madeavailable to renewable technologymanufacturers and developers has beendelivered through national andmultilateral development banks. The roleand scope of development banks is morediverse than simply financing projects.These institutions differ from privatebanks because they are able to take morerisk associated with political, economicand technological aspects, and can bear thelong time needed for risky and uncertainprojects to mature. Furthermore,development banks can set conditions foraccess to their capital in an effort tomaximize economic or social value to theirhome country. Most development banksdeliberately seek to invest in areas thathave high social value, and are willing tomake risky loans that the commercialsector would shy away from.

Development banks are flexiblefinanciers, and can provide significantcapital to renewable energy projects, whichcan represent as great an investment riskas the development of new technologies.Given the amount of financial resources intheir possession, their investmentdecisions play an important role ineconomic development trajectories. Inthis sense, it came as good news that in2013 some development banks (such theWorld Bank and the European InvestmentBank) decided to curtail funding for coalpower. And, in recent years, developmentbanks have been a key source of fundingfor clean energy projects, committingmore than US$100bn in 2012.

Who will lead thegreen revolution?

Mariana Mazzucato on how the state canact as a force for innovation and change.

“When organized effectively,the state’s visible hand is firmbut not heavy, providing thevision and the dynamic pushto make things happen thatotherwise would not have.”

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Follow the leaderThe green energy industry is still in itsearly stages. Even though some renewableenergy technologies, such as wind andsolar power, received a big push in the1970s (due to the energy crisis), they arestill characterized by market andtechnological uncertainty. They will notdevelop ‘naturally’ through market forces,in part because of embedded energyinfrastructure, but also because of a failureof markets to value sustainability or topunish waste and pollution. In the face ofsuch uncertainty, the business sector willnot enter until the riskiest and mostcapital-intensive investments have beenmade, or until there are coherent andsystematic policy signals in place. In arecent interview, Microsoft founder BillGates, one of the principals of theAmerican Energy Innovation Council(AEIC), recognized that “a key element toget an energy breakthrough is more basicresearch. And that requires thegovernment to take the lead. Only whenthat research is pointing towards aproduct then we can expect the privatesector to kick in.”

As in the early stages of IT, biotech andnanotech industries, there is littleindication that the business sector alonewill enter the new ‘green’ sector and driveit forward in the absence of strong andactive government policy. Indeed, theClimate Policy Initiative reports that in2012 institutional investors, includinginsurance companies, pension funds,foundations and endowments,contributed only US$0.4bn to climatechange mitigation and adaptation projects(a minimal figure considering theUS$70trn in assets that they manage).Meanwhile, venture capital, private equityand infrastructure funds invested onlyUS$1.bn. Thus, while ‘nudging’ mightincentivize a few entrepreneurs to act,most business actors will need stronger

signals to justify their engagement inclean technology innovation. Only long-term policy decisions can reduce theuncertainty of transforming corebusiness from legacy into cleantechnologies. In fact, no other high-techindustry has been created ortransformed with a ‘nudge’. Most likely, astrong state-led ‘push’ is needed. Thus,rather than relying on the false dreamthat markets will run the worldoptimally for us ‘if only we just leavethem alone’, policymakers must learnhow to efficiently use the tools andmeans to shape and create markets –making things happen that otherwisewould not. And making sure those

things are things we need. Increasinglythis requires growth to be not only smartbut also inclusive and sustainable.

It is of course important not toromanticize the state’s capacity. The statecan leverage a massive national socialnetwork of knowledge and businessacumen, but we must make sure its poweris controlled and directed through avariety of accountability measures anddiverse democratic processes. However,when organized effectively, the state’svisible hand is firm but not heavy,providing the vision and the dynamicpush to make things happen thatotherwise would not have. Such actions aremeant to increase the courage of privatebusiness. This requires understanding thestate as neither a ‘meddler’ nor a simple‘facilitator’ of economic growth. It is a keypartner of the private sector – and often amore daring one, willing to take the risksthat business won’t. The state is thus theiron horse of the green revolution: thespeed and direction of change willcrucially depend on it.

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Mariana Mazzucatoholds the RM Phillipschair in the Economics ofInnovation at the SciencePolicy Research Unit atthe University of Sussex.Between 2009-2012, shedirected a three-yearEuropean Commission-funded project on

finance and innovation.Her current project onfinancing innovation isfunded by the Institutefor New EconomicThinking. She advisesthe UK governmentand the EuropeanCommission oninnovation-led growth.

Mariana Mazzucato’sThe Entrepreneurial State:Debunking Public vs.Private Sector Myths wasnamed one of the‘Books of the Year 2013’by The Financial Times.

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The unequal distribution of the gains ofFairtrade (FT) derives in a large part fromthe characteristics of certification. Thecertification system presents a two-fold biasagainst the poorest developing countries.First, there are considerations related to thecosts of certification. These being the sameeverywhere, they are relatively moreexpensive for the most disadvantagedcountries, all other things being equal.

Then, due to its sliding-scale pricestructure, certification is less costly forlarge producer organizations than forsmaller ones. Finally, the cost ofcompliance with FT standards (changes inagricultural and administrative practicesthat often lead to an increase in workinghours) is higher for small organizations dueto their lower productivity and lowereconomies of scale.

The fair trade scandal:marketing poverty tobenefit the rich

Is fair tradefair?

Ndongo Samba Sylla argues that the Fairtrade Internationalfederation excludes those who need fair trade the most andthat its benefits are essentially captured by the wealthiestgroups in the supply chain.

Fair trade is a trading partnership that aims to help producers in developingcountries to achieve better trading conditions. It sets out to ensure that tradingpractices are fair, both in terms of payment and prices, and to ensure safe workingconditions. The basic idea is that everyone in the chain, from producer to consumer,gets a fair deal as part of a product. But not everyone is convinced that fair trade works.

Organic coffeegrown in theBolaven Plateauregion, ChampasakProvince, Laos PDR.

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FT-certified articles tend to be based onproducts usually exported by LatinAmerican countries. Coffee represents36% of certification demand. Tea (9.3%),fresh fruit and vegetables (9.1%) andbananas (8%) complete the list of topcertified products in 2009. One out of twoFT-certified products is either coffee,bananas or cocoa. In terms of exportrevenue, coffee is also the most sold FTproduct, at 47%, followed by bananas at18.8%. Coffee and bananas account fortwo-thirds of export revenue generated byFT. Yet, Latin America accounts for 263 outof the 317 coffee certifications granted in2009 (or 83% of certifications) and 70 outof the 71 banana certifications.

Latin America enjoys a double benefitcompared with Africa and Asia, namelythat certification is less costly in its caseand FT markets are dominated by itsmain exports. The result of this bias is thatLatin America accounts for 56% ofeffective certification demand against 29%for Africa, 14% for Asia and 1% forOceania. Though Latin Americancountries are no doubt among the mostunequal in the world, they are certainlynot among the poorest. Mexico is the firstcountry where FT was tried out. Yet thisOrganization for Economic Co-operationand Development member state accountsfor nearly a quarter of the GDP of LatinAmerica and the Caribbean. Its GDP isactually higher than that of the whole ofsub-Saharan Africa. Seen from this angle,it would seem that the FT system wasbiased right from the start.

FT no doubt helps poor and vulnerableproducers, but it certainly is not at theservice of the poorest. Effectivecertification demand is positivelycorrelated to country income. Countriesranked by the World Bank as uppermiddle-income account for 54% ofproducer organizations having receivedFT certification against 21% in ➤

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the case of low-income countries. As forleast developed countries (LDCs), they onlyaccount for 13.5% of effective certificationdemand. Whatever definition of povertyand economic vulnerability is used, theconclusion is the same: FT tends toexclude the poorest countries.

Some argue that in rich countries, suchas Mexico, there are huge social andeconomic inequalities as a result of whichsome populations find themselves in asituation of extreme poverty. This isundeniable, but not convincing. First, thisargument does not explain why withinthese inegalitarian countries, the leastpoor groups are generally selected by FT.

Then, the criterion used to justify whichnations deserve to enter the FT system iscontradictory. France, for example, is avery rich country. Yet it has many poorworkers and farmers. So why not promoteFT in France, as some have argued, or inthe US or UK? FT protagonists will arguethat these countries can tackle their ownproblems, as they have the means to do so.But this is also the case of Mexico and ofthe richest developing countries. Betterstill, differences in income betweenFrance and Mexico are much lesspronounced than between Mexico andLDCs. If we choose to favour Mexico overFrance based on the need criterion, thesame logic should mean favouring thepoorest countries at the expense ofwealthier developing countries.

Some countries are highly dependentupon the export of a limited number ofprimary products. The slightest pricevariation can have a significant impact ontheir economies. Within the FT system,dependent countries are under-represented, whereas those countries with the most diversified exports areoverrepresented.

Let us take the case of coffee, a productwith a major distributive advantage, as it ismostly produced by small producerorganizations. Ethiopia and Burundi areamong the countries most dependent oncoffee. Coffee accounts for 34% and 26% oftheir export revenue, respectively. For boththese countries, only three FT coffeecertifications were issued in 2009. Incontrast, Mexico and Peru received 42 and57 certifications, respectively, whichrepresents nearly 31% of the effectivecertification demand for coffee. Yet thesetwo economies are relatively diversifiedand, at any rate, coffee exports account forless than 2% of their export revenue.

In Latin America, Honduras andNicaragua are two countries relying greatlyon coffee. In relative terms, theirdependency on coffee is at least 10 timeshigher than that of Mexico and Peru. Buttheir share of certification demand islower. FT bananas, cocoa and cotton followa similar narrative. The countries mostdependent on these products areunderrepresented in the FT system.Among flagship products, only FT teaseems to be an exception. Yet, one of itsspecificities (as for bananas, flowers andplants, fruit and vegetables) is that it isproduced primarily by male and femalewage workers in plantations.

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“Fairtrade no doubt helps poorand vulnerable producers, butit certainly is not at the serviceof the poorest.”

This exclusion of LDCs and othervulnerable developing countries is not theresult of a deliberate choice by FTlabelling initiatives. Indeed, the movementespecially seeks to help those that alreadyare on its “path”, in other words, producerorganizations showing a developmentpotential and organizationalpredispositions.

The path taken by FT is much toonarrow for poor countries to tread. FTchose to specialize in the trade ofagricultural products. It is true that LDCsare generally countries where the labour

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could also work in other developing regions.If FT had been born in the African context, itwould probably have had a greater focus onmining or petroleum products. Likewise, ifit had been inspired in Asia, it wouldprobably have been more specialized in thetrade of textile products and clothing.

It seems in reality that internationaltrade is all about “clubs”: all other thingsbeing equal, the rich trade more with otherrich than with the poor. This is justified bytheir different levels of development.Evidence of this is that, outside of allplutocratic logic, it is difficult to identify aconsistent pattern to the expansion of FTcertification in some areas of the globe. In sub-Saharan Africa, the country with therichest economy (in GDP terms), SouthAfrica, tops FT certification demand with 54out of a total of 260 in 2009. Its two majorFT products are fresh fruit and vegetables,and wine grapes, products that are not partof the country’s top 10 exports. In Asia, Indiaaccounted for 56 of the 124 FT certificationsthat were granted in 2009. Its two major FTproducts are cotton and tea.

In a nutshell, although low, the gains ofFT for the most part go to Latin Americancountries. In its global operations, FT doesnot partake in a logic of internationalredistribution in favour of the poorestcountries, or even of dependent countries.In reality, this movement seems to follow aplutocratic logic, in other words, one thatserves the government of the rich.

What is striking is that the protagonistsand supporters of FT still have not realizedthis. The funniest part is that thesedetractors of free trade are usually unawarethat each cup of Max Havelaar coffee that isdrunk in the world is a tribute paid to theglory of “Mr Market”.

This is an edited extract from The Fair Trade Scandal: Marketing Poverty to Benefit the Richby Ndongo Samba Sylla, publishedby Pluto Press.

force is primarily employed inagriculture. The problem is, however, thatLDCs are often dependent to a greaterextent on the export of non-agriculturalprimary products. The UN trade body,UNCTAD, only ranks 11 out of a total of 49 countries as exporters of agriculturalproducts (over half of export revenue). To make matters more complex, mostLDCs are net importers of food products.With the exception of three countries, allLDCs are part of the FT category definedby the UN’s FAO as low-income food-deficit countries.

Therefore, FT tends to mostly benefitLatin American countries because thisregion is a net exporter of agriculturalproducts. Argentina, for instance, drawshalf of its export revenue from agriculturalproducts. To put things differently,agriculture in Latin America is mostlyfocused on exports, whereas for Africanand Asian LDCs, agriculture serves asubsistence purpose.

In a sense, the “mistake” made byfounders of FT and of the movement thatthey helped to establish was to believe thatwhat applied to the Latin American context

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The recently published book, The FairTrade Scandal: Marketing Poverty to Benefit theRich, by Ndongo S. Sylla, provides anintellectual critique of the Fair Trademovement, its aims and impact. As theleading global Fair Trade organization andthe label most frequently cited by Mr Sylla,Fairtrade International welcomes theopportunity to respond to this critique.

Fairtrade International (‘Fairtrade’)welcomes constructive criticism, which weuse to continually strengthen our systemand approach. However, we believe thecore of Sylla’s critique is based onunrealistic expectations about whatFairtrade can and should aim toaccomplish.

Sylla criticizes the ways in whichFairtrade has not broken free of theconventional ‘neoliberal’ trade system. Heargues that Fairtrade is a “new iteration ofthe free market rationale”, rather than analternative to the market economy. This isin part true; in order to facilitate betterdeals for farmers and workers, Fairtradehas to function within the existing marketstructures.

Therefore some elements Sylla critiquesare factors outside of Fairtrade’s control.For example, he believes producers should

earn a higher percentage of the finalconsumer price. We would support this,but Fairtrade cannot legally dictate retailprices. Instead, what we check is thatproducers earn a fairer price for theirproducts at origin, regardless of the finalprice to consumers.

Sylla criticizes the dominance of LatinAmerica in Fairtrade over Africa or Asia. Infact, the number of African producers inFairtrade has grown in recent years, andnow six in ten of all Fairtrade farmers andworkers are based in Africa. Ethiopia mayonly have five Fairtrade coffeecooperatives, but these are large

cooperatives that together represent over100,000 farmers.

Nevertheless, the Latin Americanfarmers in Fairtrade do have on averagelarger plots, and produce and sell more onFairtrade terms than their Africancounterparts. Overcoming Africa’s historicexclusion from world trade markets is along and slow process, but one in which weare actively engaged – and it is theproducer-owned Fairtrade Africa leadingmuch of this work. Meanwhile, LatinAmerican farmers need Fairtrade, too.There are huge disparities of wealth inmany Latin American countries, as inAfrican ones, and rural farmers andfarmworkers are among the mostmarginalized.

Other aspects of Sylla’s critique aredeliberate choices we have made to drivewider change and impact. Sylla challengesFairtrade’s decision to work with largeretailers and companies, while at the sametime saying that farmers need to increasesales on Fairtrade terms. It is precisely forthis reason that we are working with a widevariety of businesses – from small shops tolarge, mainstream brands. Large-scalecommitments and global partnershipsmean that we can reach many morefarmers, workers and consumers, raisepublic recognition and ultimately increasedemand for Fairtrade certified products.Our approach is to engage with companiesto change trade from the inside.

Sylla also criticises Fairtrade’s relativelysmall impact on global poverty. However,Fairtrade does not claim our approach willlift entire countries out of poverty oraddress poverty everywhere it exists. Ourwork specifically targets small-scalefarmers and workers to support them asthey improve their livelihoods andstrengthen their communities. In this, agrowing body of research points to the veryreal impact Fairtrade is having for over 1.4million farmers and workers worldwide.

Strengthening farmers’and workers’ position in an imperfect trade systemLarry Attipoe, International Development Director ofFairtrade International, responds to The Fair Trade Scandal

“Fairtrade aims to challengethe imbalance in global tradeby strengthening the positionof farmers and workers.”

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Centre for Evaluation (CEval) associatedFairtrade certification with betterlivelihoods and increased control oversupply chains for small farmers, andbetter working conditions for plantationworkers. This report was based onextensive qualitative and quantitativedata analysis through case studies of sixdifferent producer organizations.

Ultimately, Fairtrade aims to challengethe imbalance in global trade bystrengthening the position of farmersand workers. Our standards are a tool for

community–based development,bringing benefits beyond the Fairtrademinimum price and premium.Supporting producers as they buildstrong organizations means they are ableto reduce costs, provide a structure forcrop improvement and joint investment,and negotiate from a position that wouldotherwise be beyond their reach. Oursystem embodies this alternate visionwith producers as half-owners who holdkey roles in our global governance.

Fairtrade is a constantly evolvingsystem doing as much as we can to make

trade fairer. We do not claim to be aperfect solution to the many issues ininternational trade – but we are a part ofthe solution. As we have grown, we havestrengthened our certification systems,and are confident in the strength of ourstandards as a tool for producers,traders and companies to create moreequitable trade relationships and buildthe capacity of farmers and workers tomanage the rigors of internationaltrade.

We invite everyone interested to learnmore about our work at www.fairtrade.net

Yembi Kabre, CEO, andSabine Sié, GeneralManager, of theFairtrade-certifiedcooperative, CAPEDIG, inCôte d’Ivoire, examinecocoa beans for quality.

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■ A new report shows thatSouth-South trade inenvironmental goods andservices between developingcountries is growing rapidly.South-South Trade in RenewableEnergy – A Trade Flow Analysis ofEnvironmental Goods, publishedby the United NationsEnvironment Programme ,shows that the share ofdeveloping countries in global

cooperation could help generateadditional commercially viableproducts for export.

■ China is the world’s largestgreenhouse gas emitter, by far.The country produces more thana quarter of the planet’s annualgreenhouse gas emissions.China is also the world’smanufacturing hub. Accordingto an analysis carried out by TheCarbon Brief, one reason for theincrease in emissions is thatChina is making more and moreof the stuff the rest of the worldwants to buy. On the other hand,emissions in places like the

trends

BUSINESS MATTERS

exports of renewable energygoods more than doubled, from32% in 2004 to 75% in 2011.

While the UNEP reportfocuses primarily on renewableenergy markets, it also pointsout that there are other growingdynamic markets forenvironmental goods andservices. For instance, watertreatment equipment and watersupply – valued at US$ 50bn

globally – present developingeconomies with a promisinggrowth potential, as well as theopportunity to provide morethan 700 million people withaccess to improved drinkingwater. Additionally, South-Southtrade in organic food andbeverages – with a global marketvalue of over US$63bn – is alsoidentified as another growingmarket, where greater regional

The latest Global Green EconomyIndex (GGEI) ranks Germany(perception) and Sweden(performance) as the topcountries. Besides performingwell on both the economic andenvironmental areas of theGGEI, these countries havedisplayed consistent greenleadership and received globalrecognition for it

The GGEI, published by DualCitizen, a consulting firm basedin the United States, measuresboth the green economicperformance of 60 countries andhow experts assess thatperformance. The GGEIperformance index usesquantitative and qualitativeindicators to measure how welleach country performs on fourkey dimensions: leadership andclimate change; efficiencysectors; markets and investment;and the environment and naturalcapital. The GGEI perceptionsurvey collects assessments fromexpert practitioners on thesesame four dimensions.

Covered for the first time inthe 2014 GGEI, Costa Ricaperforms extremely well, ranking

Green economy leadersthird on the performancemeasure, behind Sweden andNorway, and receiving strongrecognition on the perceptionsurvey, an impressive result forsuch a small country.

Many of the fastest growingeconomies in the world rankpoorly on the GGEIperformance measure,highlighting an urgent need toreorient their economies togreener growth pathways. Thesecountries are mostly in Africa,the Gulf and South-East Asia.

There are concerning resultsrelated to more developedcountries as well – notablyAustralia, Japan, the Netherlandsand the United States – whereperceptions of their greeneconomic performancedramatically exceed their actualperformance on the GGEI.

Despite its leadership infounding the Global GreenGrowth Institute, South Koreaperforms poorly, ranked 39thout of 60 on this year’s GGEI.Despite better perceptionresults, Japan also performspoorly on the 2014 GGEI, ranked44th out of 60.

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European Union are falling –partly because it ismanufacturing less, andimporting more.

The simplest way ofmeasuring a country’s emissionsis to look at how much pollutionis released within its borders,which is called territorialemissions. But, according to TheCarbon Brief, it is also possible tolook only at the emissionsassociated with products thatactually stay in a country. Theseare termed consumptionemissions, and this accountinglowers the country’s carbonfootprint a bit.

In 2012, China emitted about1.6 billion tonnes of carbondioxide in the process ofmaking products it exportedelsewhere in 2012, about 16%of its total. Arguably, thosemight be emissions the rest ofthe world is responsible for.

■ The people most likely to beleft behind by development arethose facing ‘intersectinginequalities’, or economicdeficits intersecting withdiscrimination and exclusionon the grounds of identity andlocational disadvantage. A newreport, Strengthening social justice

to address intersecting inequalitiespost-2015, published by theOverseas Development Institute,considers the experience ofseven countries (Brazil, Ecuador,Bolivia, India, Ethiopia, Pakistanand Nepal).

The report shows that keyingredients for addressingintersecting inequalities are:social movements demandingchanges in the ‘rules of thegame’; political trajectories andprocesses of constitutionalchange that facilitate andactualize these changes; socialguarantees, opportunityenhancements and

developmental affirmativeactions as well as specificpolicies and programmes whichshow commitment to reduceintersecting inequalities overtime.

The post-2015 agenda canhelp establish global normswhich will support andencourage mobilization to tackleintersecting inequalities,including a strong commitmentto universal quality basicservices, and the development ofcountry-specific frameworks oftargets and indicatorsmonitoring intersectinginequalities.

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Global carpet maker, Interface,and biodiversity group,Zoological Society of London(ZSL) have created an inclusivebusiness model that enablesimpoverished fishingcommunities in thePhilippines to collectdamaging, discarded fishingnets from the ocean andshores. The nets are purchasedby Italian yarn manufacturer,Aquafil, which recycles theminto nylon yarn that is thenused by Interface to producecarpet tiles.

The initiative, called Net-Works, began just over twoyears ago. So far, it has stoppedmore than 38,600 kilogrammesof discarded fishing nets frombecoming pollutants in theocean, and helped 4,500villagers in communities in thePhilippines to earnsupplemental income equal to

84,000 additional meals, said itscreators.

In collaboration with ZSL andmarine biologist, Dr. Nick Hill,Interface decided to focus theNet-Works pilot programmewithin the 7,000 Philippineislands, on the Danajon Bank –in one of only six double reefsin the world.

“In an eco-system as delicateas the Danajon Bank,” Hill says,“discarded nets are incrediblydestructive. The nets takecenturies to degrade, and with anylon density greater than thatof water, the nets lie on theocean floor where they dountold damage to marine life.”

As well as helping the villagersclean, sort and sell back thewaste nets, Interface and theNet-Works partners haveestablished community bankingsystems for the residents –supporting and strengtheningthe local economy andproviding new financialopportunities for residents.

In 2015, the Net-Worksinitiative will be launched in theLake Ossa area of Cameroon,West Africa.

Fishing nets into carpets

Filipino villagerscollecting oldfishing nets to sellfor recycling intocarpet tiles.

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changing the productivity and distribution offish, threatening a vital source of food andincome for island dwellers.

Because of the lack of diversification andsmall market size of their economies, theSIDS are vulnerable to fluctuating marketprices and devastating weather events,causing further problems to the economy.Tourism represents more than 30% of SIDS’total exports. If the sea level rises by just50cm, the Caribbean island nation ofGrenada, for example, would lose 60% of itsbeaches, severely damaging its economy.

The way forwardUnfortunately international communitynegotiations have been slow-moving in thefight to reduce the consequences of climatechange, especially in SIDS. One step theyshould take is to adopt a legally bindingagreement that includes clear, achievabletargets to reduce greenhouse gas emissions.

States and multilateral developmentinstitutions need to develop appropriategrowth indicators that take into accountclimate change, poverty, natural resourcedepletion, human health and quality of life ofSIDS because typical GDP-based indicators donot reflect many of the distinctive features ofSIDS economies, such as small market size.Governments also need to drive diversificationof sectors and create low-carbon jobs so thattheir economies are more resilient to climatechange. Pacific SIDSs are especially suffering

Small Island Developing States (SIDS) canbe characterized by relatively small landmasses, remoteness, livelihood constraints,lack of food security and susceptibility tonatural hazards. Their vulnerability to risingsea levels is also high. While the globalaverage of sea level rise is 3.2mm per year, theisland of Kosrae, in the Federated States ofMicronesia, is experiencing a sea level that isrising at a rate of 10mm per year. Thetropical Western Pacific has experienced sealevel rise at a rate of 12mm per year between1993 and 2009 – about four times the globalaverage. Other growing threats to SIDSposed by climate change include increasedflooding, shoreline erosion, oceanacidification, warmer sea and landtemperature, lack of fresh water and damageto infrastructure from extreme weatherevents like hurricanes and tsunamis.

Apart from its direct impacts, climatechange will have a ripple effect on severalsocio-economic factors in the SIDS. Forexample, in small villages in the Caribbeanand Pacific regions, the fishing industry playsa significant role. In the Pacific SIDS, wherefish account for up to 90% of animal proteinin the diet of coastal communities, risingocean temperatures and acidification are

economically because of ‘Dutch disease’. Alsoknown as the natural resource curse, ‘Dutchdisease’ is the apparent relationship betweenan increase in revenues from naturalresources and the resulting strengthening of a country's currency which makes thecountry's other exports more expensive andits imports cheaper. As a consequence, thecountry’s manufacturing and agriculturesectors become less competitive. It is another problem that governments mustwork to overcome.

Despite the challenges these smallnations have to confront, there is incrediblescope for development, particularly in thearea of renewable energy. Currently morethan 90% of the energy used by SIDS comesfrom heavy oil imports, imposing a heavyburden on the limited financial resourcesthat are available and pushing electricityprices up. This explains the large percentageof residents in SIDS that do not have accessto electricity. For example, 70% of thepopulation in the Pacific Islands live without electricity.

Potential alternative and domestic energysources include wind, solar, tidal,hydroelectric and geothermal, but SIDS lackboth the political will and the significant

Kaierouann Imarah Radixbelieves that young peoplewill bear the brunt of theproblems caused by climatechange and that it will fall tothem to find the solutions.

KAIEROUANN IMARAHRADIX is director ofGuyana’s S4 Foundation,a network of womencommitted to helpingand supporting otherwomen in Guyana. She isalso a One Young WorldAmbassador. One YoungWorld is a UK-based not-for-profit that gatherstogether the brightestyoung people from

around the world,empowering them tomake lasting connectionsto create positive change.It stages an annualsummit where the mostvaluable young talentfrom global and nationalcompanies, NGOs,universities and otherforward-thinkingorganizations are joinedby world leaders.

Climate change: challengesand opportunities for SIDS

and management of projects to sustainablybuild resilience over time in order to makesignificant gains in mitigation of andadaptation to climate change.

A major cause for concern is the hugefinancial cost of adaptation to climate change.The capital cost of sea level rise in theCaribbean Community countries (CARICOM)alone is estimated to be US$187bn by 2080.

Youth actionYoung people, not only from SIDS but from allover the world, can be part of the solution inthe battle to prevent damage to theenvironment. I am a member of the CaribbeanYouth Environment Network (CYEN), whichraises awareness of climate change relatedissues across the Caribbean. CYEN Guyanahelps by doing everything from coastal clean-ups to holding Young Eco-Change Makersenvironmental camps.

I believe that One Young WorldAmbassadors, SIDS youth and young peopleall over the world must continue to raiseawareness of these issues and make their voicesheard as a central part of the negotiationsaround the United Nations’ post-2015development agenda on climate change.

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investment needed to sustainably fund anddevelop such projects. Many SIDS alsopossess a wealth of unexploited naturalresources, such as minerals, renewableenergy resources and fish stocks. Papua NewGuinea has already embarked on exploratoryactivities for mining of seabed manganesenodules and rare earth elements. Other SIDSshould follow suit.

Caribbean SIDS can learn from andemulate Pacific SIDS by moving away fromemphasizing small state vulnerabilities andinstead pay attention to new strategicregional environmental initiatives, such asSIDS DOCK, which helps SIDS transformtheir national energy sectors into a catalystfor sustainable economic development. At astate level, there must be proper planning

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Creative industries: awindow of opportunity

The creative industries are one of the fastest growing

sectors of the world economy. Global trade in creative

goods and services was estimated at US$624bn in 2011

after rebounding from a slump in the aftermath of the

global economic crisis and downturn. This growth is also

evident in national economies. For example, in the

United Kingdom the creative industries gross value-

added has grown by 15.6%, compared with 5.4% for the

overall economy during the period 2008 to 2012. The

impact of the sector on employment is also significant,

with an annual growth rate in 2012 measured at 8%,

compared with 0.7% for the UK economy.

In short, in the midst of the worst global economic

depression in living memory this sector has

outperformed most other sectors. This performance

can be attributed to the shift towards a post-industrial

economy where personal, recreational, and audio-

visual services have expanded as a share of the

expenses of the average household and as a share of the

economy. Of note is the process of rapid techno-

economic change in products, distribution and

marketing (e.g. e-books, iTunes, Amazon.com, NetFlix);

the increasing commercialization of intellectual

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Bob Marley, Jamaican

reggae singer-songwriter, musician,

and guitarist, who

became one of the

world’s best-selling

artists of all time, with

sales of more than

75 million albums

and singles.

Keith Nurse explores how the creative industries can be an engine for economic

growth and a mechanism for diversifying economies in the Caribbean and beyond.

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property, particularly copyright; the strong cross-

promotional and branding linkages with sectors like

tourism (e.g. cultural, heritage and festival tourism);

and the convergence of content, media and telecoms

(e.g. the Internet, mobile and ecommerce).

At the crossroads

Small Island Developing States (SIDS) are at the

crossroads of human cultural interaction. SIDS are

plural and hybrid sites for identity formation, intangible

heritage and global inter-connectivity from pre-colonial

times to the contemporary phase of globalization. In

effect, they are hotspots of cultural diversity on account

of the penetration levels of global trade, global diasporas,

global tourism and global media. It is this diversity that

makes SIDS an important contributor to world-wide

creativity. It is an area of the global economy where SIDS

enjoy some comparative advantage in production, but not

in the distribution and marketing elements of the value

chain, as exemplified by the Caribbean case.

The Caribbean region has produced for decades many

globally recognizable artists like Harry Belafonte, Sydney

Poitier, Louise Bennett, V.S. Naipaul, Derek Walcott,

Wilfredo Lam, Boscoe Holder, Celia Cruz, Wyclef Jean,

Juan Luis Guerra, Shaggy, Eddy Grant, Peter Minshall,

Oscar de la Renta, Euzhan Palcy, Raoul Peck, Jean-Michel

Basquiat, Heather Headley, Nicky Minaj and Rihanna, to

name but a few. The most famous of all is Bob Marley

whose music catalogue is worth US$100m and whose

estate was estimated at US$30m at the time of his death.

These artists have generated global reach beyond that

which the region’s size would suggest.

A key growth sector

The creative industries have emerged as a key growth

sector in the Caribbean economy through its contribution

to gross domestic product (GDP), exports, employment

and intellectual property earnings. Caribbean

governments and other key stakeholders have recently

begun to recognize this potential and are implementing

strategic frameworks to capitalize on this opportunity.

The Barbados government published a Cultural Industries ➤

Rihanna, Barbadian

singer and global

pop star, promoted

the natural andcultural heritage of

Barbados as part of

a three-year dealsigned with theBarbados Tourism

Authority in 2011.

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“The term cultural or creative industries describes

the value chain of economic activities of creative

enterprises and cultural entrepreneurs, for�profit as

well as for not-for-profit, in the production,

distribution and consumption of products related to

multimedia/ film, advertising and communication

services, music, theatre, dance, visual arts and crafts,

new product design, festivals, cartoons/animation,

textiles and fashion, (slow) food as well as other high

value-added products which are agribusiness-based.”

(Creative industries for youth: unleashing potential

and growth, UNIDO Working Paper, 2013)

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Development Bill in 2013 that aims to offer a range of tax

and fiscal incentives targeted at facilitating growth in the

sector. The Trinidad and Tobago government has

recently created the Creative Industries Company, which

aims to foster investment and allow for trade facilitation.

Figure 1 shows the growth of creative goods exports

for the Caribbean Forum sub-group (CARIFORUM) for

the period 2002 to 2011. In spite of the significant

fluctuations, it shows an upward growth trajectory

peaking in 2011, with just over US$400m in export

earnings. The top earning sectors are arts and crafts,

printed matter, newspapers and paintings.

The digital and Internet economy

However, when an analysis of the documented economic

flows is done, Caribbean countries have a significant and

widening deficit in the trade of cultural goods. What this

means is that the region imports more merchandise

(e.g. CDs, DVDs, books, magazines and paintings) than it

exports. This should be of no surprise to anyone familiar

with the sector. The region’s competitiveness in the

creative goods sector is relatively weak due to the decline

of manufacturing in sectors like record and book

production. The producers in the region did not make

the shift to the digital and Internet economy, and so the

region has become even more import dependent in the

creative goods sector.

It is well recognized that merchandise trade does not

accurately reflect total exports for the sector because

much of what the region exports escapes capture in the

trade statistics. For example, data from trade in services

(e.g. fees from live performances, tours, concerts, etc.) and

intellectual property (e.g. royalties from designs, authors

and composers rights, and digital trade, etc.) are largely

undocumented in spite of the fact that these are the areas

where the Caribbean has fairly strong export earnings

and increasing potential for growth in the new digital

and Internet based economy.

The creative or cultural industry sector has

experienced some expansion in industrial and export

capabilities in the last few decades, in particular with the

growth of the festivals sector and the expansion of the

music and audio-visual industries. In addition, shifts in

the structure and operation of the global economy, for

example the negotiated market access in the

CARIFORUM-European Union Economic Partnership

Agreement, present new opportunities for expansion and

diversification. The projections are that the sector can

grow multi-fold over the next decade once the required

strategic investment, business support and trade

facilitation mechanisms are put in place.

What needs to be done

All told, it can be argued that the creative sector makes an

important contribution to the Caribbean economy and

ranks in the top export earning sectors. As such, for many

small developing economies, like those in the Caribbean,

with a narrow and declining industrial base, the creative

industries are an engine for economic growth and a

mechanism for diversifying economies, improving

competitiveness and promoting youth entrepreneurship.

In this regard, funding new start-up companies and

facilitating cluster development in the creative sector are

key policy priorities with potentially high returns on

investment.

➤

Figure 1: CARIFORUM Creative

Industry Exports 2002-2011 (US$)

Source: UNCTAD, UNCTADstat

*approx US$m

2002 2003 2004 2005 2006

120*

180mUS$

120mUS$

210mUS$

400mUS$

360

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To achieve these results, the region would be required

to shift the industrial paradigm from the stand-alone

firm operating in isolation to a context where there is a

higher level of collaboration and coordination. For

example, there is a clear opportunity for the aggregation

of content to take advantage of the expanding digital

trade in online, streaming and subscription services. As it

now stands, the supply of Caribbean content – whether it

be music, films, visual arts, pictures or books – is highly

fragmented and there is no identifiable marketplace to

access the content. Maximizing on the opportunities of

the digital market is the area of greatest potential. To do

so would require an innovation governance framework

where the key owners of copyright are working in concert

to offer their creative content to a global market.

Linkages with tourism

The creative sector has strong cross-promotional

linkages with tourism which is the largest global industry

and the key driver of the Caribbean economy with the

largest share of GDP, export earnings and employment.

In this regard one of the key areas where countries have

potential for growth is in exploiting the value of

destination and intellectual property branding. An

example of this is the video campaign where Rihanna

promotes the natural and cultural heritage of Barbados

as part of a three-year deal signed between the Barbados

Tourism Authority and the global pop star in 2011.

Further evidence of the value of the creative sector to

the wider economy is exemplified through the ways that

the region’s major festivals impact on visitor arrivals and

expenditure, hotel occupancy rates, car rentals, telecoms

and so on. Cultural events also generate significant

media impact and destination branding, as illustrated by

the market appeal of festivals like the Trinidad and

Tobago carnival, the Havana Biennale, Reggae Sunsplash

in Jamaica, the St Lucia Jazz festival, the Dominica World

Creole Music festival, the Barbados Crop Over festival,

the Jonkanoo festival in the Bahamas and the Calabash

literary festival in Jamaica.

The case of the Caribbean illustrates that there is a

window of opportunity for the SIDS given the rise of the

creative economy and the increasing commercialization

of the arts. The creative industries offer scope for

innovation, economic diversification and global

competiveness since they draw on the creativity and

enterprise of local artists and the youth. As such, in the

context of rising unemployment among the youth,

investing in the creative industries represents a viable

option that the SIDS should prioritize. The conclusion

is that the cultural industries should be viewed as a

critical strategic resource in the move towards creating

sustainable development options.

KEITH NURSE is Executive Director of UWI

Consulting Inc. He is the former Director of the

Shridath Ramphal Centre for International Trade

Law, Policy and Services, University of the West

Indies, Barbados. He currently holds the WTO

Chair at the University of the West Indies. He is the

co-editor of the recently published book, The

Global Economic Crisis and the Developing World:

Implications and Prospects for Recovery and Growth

(Routledge, 2012).

2008 2009 2010 2011

290mUS$

260mUS$ 250mUS$

410*

2007

0mUS$

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ENHANCINGPRODUCTIVECAPACITIES

KEYNOTE

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While sustainable tourism andfishing are generating revenue inthe SIDS, WU Hongbo considersnew approaches with the potentialto increase productive activities. ➤

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ORole-playing during a teachertraining workshop in Praia in theRepublic of Cabo Verde, part ofUNIDO’s EntrepreneurshipCurriculum Programme. Theprogramme, which is underwayin eleven developing countries,supports the development ofentrepreneurial attitudes andskills by introducingentrepreneurship as a subject in secondary schools.

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Productive activities in Small IslandDeveloping States (SIDS) contribute significantlyto sustainable development but are limited bythe inter-related challenges of the small size ofthese countries, their remoteness, theirvulnerability to external economic shocks,climate change and other environment-relateddisasters, as well as by social constraints such asunemployment. These constraints have beenidentified and reiterated in intergovernmentalagreements, such as Agenda 21, the BarbadosProgramme of Action (BPOA), the MauritiusStrategy and, most recently, the SAMOA Pathway,the outcome document of the ThirdInternational Conference on SIDS held in Apia,Samoa in September 2014. We need to examinehow the SIDS have creatively tackled theseconstraints.

Enhancing the resilience of SIDSThe 1992 Earth Summit recognized the specialvulnerabilities of the SIDS. These vulnerabilitiescan limit the capacity of SIDS to fully benefitfrom trade liberalization and globalization,seriously limiting the scope and cost-effectiveness of their productive sectors.

The BPOA of 1994 identified specific actionsfor the sustainable development of the SIDS,including those to enhance SIDS’ resilience inproductive activities. However, the subsequentdecade saw growing challenges for SIDS, which

were experiencing increased exposure todisasters and to external shocks, while dealingwith their unique vulnerabilities.

Productive sectors suffer every time disastershit SIDS. Measured by the frequency and severityof disasters, SIDS are among the top “hot spots”of the world, with economic losses per disasteroften exceeding one percent of gross domesticproduct (GDP) or more. When disasters hit them,the debt to GDP ratio of SIDS grows by as muchas five percentage points.

The Mauritius Strategy for the furtherimplementation of the BPOA, adopted in 2005,set forth actions in 19 priority areas, building onthe original 14 thematic areas of BPOA. The newadditional thematic areas in the MSI includedtrade, sustainable production and consumption,and knowledge management, and were intendedto support SIDS in enhancing their productivecapacities and opportunities to participate inglobal supply chains. The new SAMOA Pathwaycalls for support for the efforts of SIDS to buildresilience to the impacts of climate change andto improve their adaptive capacity through thedesign and implementation of climate changeadaptation measures appropriate to theirrespective vulnerabilities and economic,environmental and social situations.

Working with nature Despite their inherent vulnerabilities andsetbacks, SIDS have achieved many successes, inpart thanks to their own efforts but also throughinternational cooperation. Take tourism as anexample. The number of international touristsvisiting SIDS reached over 40 million in 2011,with annual revenue generated by internationaltourism exceeding US$38bn. For some of theSIDS, tourism accounts for over 40% of GDP,and 50% to 75% of exports of services. However,given its scale, tourism has the potential to createhuge economic and human costs in the longterm if not done sustainably. Learning from pastmistakes, the governments and the private sectorof SIDS have been looking at how to maketourism sustainable as a main revenue-generating productive sector.

This requires ensuring that sustainability isadopted as the primary objective of all sectors ofthe tourism industry, encouraging responsiblepractices through voluntary codes of conduct,applying appropriate environmental regulationsand management measures, providingappropriate financial incentives such as user feesand tourist taxes, and applying the ‘polluter pays’principle. As a result of these measures, moreand more SIDS tourism operators are ➤

➤

WU Hongbo was appointed UnitedNations Under-Secretary-General forEconomic and Social Affairs on 1 August2012. Prior to this appointment, he servedas Ambassador of the People’s Republic ofChina to the Federal Republic of Germany.As head of the UN Department ofEconomic and Social Affairs, Wu overseesintergovernmental processes, policyanalysis and capacity-development work.He also serves as the Convenor of theExecutive Committee on Economic andSocial Affairs, and advises the UNSecretary-General on all development-related issues, including climate change,internet governance and financing fordevelopment. In 2014, Wu served as theSecretary-General of the thirdInternational Conference on Small IslandDeveloping States.

Many Small IslandDeveloping States aredeveloping andimplementing policiesthat promote responsive,responsible andsustainable tourism withpositive economic, socialand environmentalimpacts. These include afocus on thedevelopment of eco- ,agro-, and culturaltourism, and the designand implementation ofmeasures to enhanceemploymentopportunities.

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promoting sustainable tourism, includingeco-tourism or cultural tourism.

Another success story is fisheries. Ascustodians of marine resources, SIDScommunities have taken care of sustainablefisheries, promoting small-scale fisheries andusing their fishery resources to develop relatedindustries. To ensure long-term productivity oftheir fishery industries, SIDS have taken on adisproportionate amount of the burden ofconserving fishery resources. To help address thissituation, the international community has beenpressing forward with partnerships, often led ormanaged by SIDS. For example, in the Pacificregion, the United Nations IndustrialDevelopment Organization has been workingwith the governments of Pacific SIDS, theSecretariat of the Pacific Community, the PacificIslands Forum Fisheries Agency and otherpartners, on sustainable management of tunaresources. The partnership aims to promote theadoption of appropriate technology andtechniques that allow value addition in tunaresources and enhance the role of small-scalebusinesses in the value chains.

Promoting new approaches in theproductive sectorWhile these success stories demonstrate thepotential of productive activities in various SIDS,how then do we ensure their replication andscaling up across the productive sector in SIDS?The answer, in part, lies in entrepreneurship andinnovation, including in the green economy. To ensure “sustained and sustainable inclusiveand equitable economic growth with decentwork for all,” the SAMOA Pathway seeks to fosterentrepreneurship and innovation, includingbeyond the traditional sectors of fisheries andtourism, and to create local decent jobs throughprivate and public projects. New sectors forentrepreneurship include climate changeadaptation and mitigation, disaster riskreduction and renewable energy.

Promoting knowledge, skills, technology, andbusiness support in SIDS will help to fosterindustry and productive activities. Partnershipsplay an important role in this. The SAMOAPathway and the overall theme of the 2014 SIDSConference stressed partnerships in promotingproductive activities in SIDS, within the

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Artisan market inSolomon Islands.Fosteringentrepreneurship,building capacity andincreasingcompetitiveness cangenerate decent jobs,partnerships andinnovation.

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confines of their inherent vulnerabilities. In SIDS, land size and population size can

make large-scale industries problematic andunsustainable. It may be more appropriate togenerate decent work, partnerships, andinnovation by fostering entrepreneurship,building capacity and increasing thecompetitiveness and social entrepreneurship ofmicro, small and medium-sized enterprises andstate-owned enterprises. In this respect, itwould also be important to encourage inclusiveand sustainable industrial development withthe participation of all people, including thepoor, women, youth and persons withdisabilities. Artisanal and small-scaleproductive activities of note include eco-tourism operations, artisanal fisheries,community-based off-grid renewable energyprojects, and small-scale mining projects.

The fact that SIDS are small and remote alsohas its benefits, including the existence of strongsocial ties and close-knit communities, and thepreservation of traditional culture. The strongsocial capital in SIDS should be considered animportant asset in any discussion about

increasing productive activities in SIDS. Suchdiscussion must also address the overall socialdevelopment of SIDS, including enhancing thequality of education, improving public healthand reducing the high prevalence ofcommunicable and non-communicable diseases.

ConclusionProductive activities in SIDS can best contributeto sustainable development by recognizing andstrengthening the role that all stakeholders canplay in these activities through partnerships.SIDS have strong social capital, which should beharnessed to strengthen productive activitiesand economic development.

Industries and enterprises in SIDS must takeinto account the structural dynamics of theSIDS, such as small size and small population,and focus on activities that are best suited forthe islands. New investors and partners alsoshould be aware of the diversity of the SIDS,particularly in different regions. Once thesefactors are adequately addressed, productiveactivities will truly accelerate the sustainabledevelopment of SIDS.

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Fishermen off the coastof the Pacific island ofNauru. Small-scale reeffishing provides a goodpart of the nutritionalprotein that is thebedrock of Nauru’scontinuing foodsecurity.

Island nations in the Pacific have long complained of too many fishing boats in the region catching far fewer fish. Now, writes Giff Johnson, unity is shifting control of fisheries to the Pacific islands.

Pacific unity ispaying off –infisheries at least

As Pacific islands ratchet up control offishing in their waters, we’ve seen apredictable response from distant waterfishing nations.

When the Western and Central PacificFisheries Commission (also known asthe ‘Tuna Commission’) was establishedby treaty 10 years ago, the Japanesegovernment, despite its activeparticipation in negotiations leading upto the treaty, refused to sign on at thefirst opportunity. Despite being part ofthe negotiations, it said it wouldn’t backthe newly established regional fisheriesmanagement organization for thePacific. Was it unsurprising that a yearlater, Japan signed on?

The Parties to the Nauru Agreement(PNA), which has set itself up as a fisheriescartel, established a vessel day scheme forselling fishing days, with the goal oflimiting the then-uncontrolled level ofpurse seine fishing to conserve tuna andincrease its value. PNA has certainly beensuccessful in the latter (tuna revenueflowing to the eight member nations hasrisen from US$60m annually in 2010 toover US$250m last year), if not assuccessful at the former.

But when PNA started enforcing thevessel day scheme, most distant waterfishing nations balked at accepting it.They had been used to sending fisheriesteams to island capitals once a year tonegotiate license fees, which historicallypaid just pennies compared to the profitsreaped by the fishing countries. Thesecountries were not about to change a styleof operation that had fed their fishing

industries for two generations. Now, withthe exception of the European Union, alldistant water fishing nations with purseseiners operating in the region are fishingunder the vessel day scheme. Shall we takebets on the EU’s ultimate acquiescence tothe vessel day scheme?

Then there are the Americans, who haveenjoyed preferential access to PNA waterssince the late 1980s, when a US StateDepartment-backed fishing treaty cameinto play with all Forum Fisheries Agencyislands. The treaty ended years of US-flagged boats fishing without paying,ignoring rules, and generally giving the USa bad name in the region. When the treaty’sfinancial package came up for renegotiationseveral years ago, the US was payingUS$21m annually. The PNA demandedtriple this amount. ‘It’s too much,’ said USnegotiators. ‘We can’t pay it.’ Over theensuing years of negotiation the US sidefinally agreed to pay US$63m a year – a dealthat went through in 2013. Now PNA hasupped the access ante because it isincreasing the fishing day fee fromUS$6,000 to US$8,000 come 1 January, 2015.And the US has tentatively agreed toUS$87m a year to secure fishing access for it

vessels. ‘Can’t afford it?’ The better questionis, ‘do you want to keep fishing?’ And the USgovernment and industry clearly know theanswer to this question.

With it now having become clear thatbigeye tuna are being over-fished, the movefor greater control of the longline fishingindustry is gaining momentum. Since the3,000 longliners plying the Pacific generallyfish on the high seas, they are more difficultto manage than the purse seiners that fish‘in-zone’. Still, PNA has announced plans toextend a vessel day scheme to longliners tobring it under the control and managementof Pacific islands.

As pointed out at a recent fisheriesmeeting by Phil Roberts, the managing

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GIFF JOHNSON is editor ofthe weekly newspaper, TheMarshall Islands Journal.

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director of global tuna supply company, Tri-Marine International, “When PNA bannedhigh seas transshipment for purse seiners,there were some gripes. But then everyonestarted doing in-port transshipment.” In-port transshipment meets dualconservation and economic developmentgoals for Pacific islands: it increased theopportunity for monitoring vessel catches,while offering numerous spinoff economicbenefits to Pacific ports. One of the keyproposals on the table is to halt longlinerstrans-shipping on the high seas, which iswhere virtually all of the distant water

fishing fleet currently off-loads its catchesof tuna – a system that is problematic foreffective fisheries management andproducing accurate stock assessments.

The longline industry of Japan, SouthKorea, Taiwan and China is not helpingmatters, either. The fact that these fournations have, since the start of TunaCommission a decade ago, failed to provide operational catch data that is arequirement of membership appearsfinally to be coming to a head. The 17-member Forum Fisheries Agency (FFA)issued a strongly worded statement inAugust 2014 calling for action by these fournations to provide data to reduce gaps instock assessments. An increasing numberof Pacific fisheries officials want the TunaCommission to sanction these countries

● The Parties to the Nauru Agreement (PNA)brings together eight Pacific Island countries tosustainably manage tuna and increase economicbenefits for their peoples. PNA members Kiribati ,the Marshall Islands, the Federated States ofMicronesia, Nauru, Palau, Papua New Guinea,Solomon Islands, and Tuvalu. These countriesown waters which supply 25% of the world’s tuna,an estimated US$2bn worth of fish every year. ● Fisheries scientists have recently released newassessments of tuna populations in the westernand central Pacific Ocean. The numbers of tunastock are at a dangerous level and worsening.● Two of the main commercial tuna fishingtechniques are longline fishing and the purse-seine technique.

Longline fishing uses a mainline which can bemore than 100 km in length and from which asmany as 3,000 branch lines, each with a baitedhook, are dangled in the water column. Themainline is kept afloat by a series of buoysattached at intervals. The gear is passive, in that itcaptures whatever fish happen to take the bait.

Purse-seine nets are set vertically in the water,with floats attached to the upper edge, whilealong the lower edge is a chain, for weight, and aseries of rings, through which the pursing cablepasses. The nets can be as long as 1.5km andmore than 150m deep. On sighting a school oftuna, a large skiff with the end of the net attachedis released from the stern of the fishing vessel.The vessel encircles the school with the net. Thecable is hauled aboard the vessel, causing thebottom of the net to close, and the fish aretrapped inside the pursed net. Most of the net isthen pulled aboard the vessel, confining the fishin a “sack,” from which they are transferred to thedeck of the vessel.

for failure to provide the required data.History tells us that if island countries

stay unified, they can gain control over anindustry long dominated by distant waterfishing nations. Enforcing ‘best practice’management rules is the only way toensure the future viability of tuna stocksnot only for Pacific islanders, who dependon this for food security, governmentservices and jobs, but for the rest of theworld that is increasingly dependent ontuna fish as a food source. The fact thatdistant water fishing nations have had to beforced, sometimes kicking and screaming,by the PNA, FFA and the Tuna Commissionto comply with changes to sustain andstabilize the industry, while sharing thebenefit with island nations, simplyunderlines the point that unity works.

The PNA and FFA have proved over theyears that there is power in numbers. It’san example of success for the region thatcould easily be applied to other economicareas, including deep-sea mining.● Republished from Pacific Politics with thepermission of the Pacific Institute of PublicPolicy (PiPP), the independent think-tankserving the Pacific islands community.

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The size of the youth population in the PacificIslands is double the global average with 54%aged below 24 years, creating enormouschallenges for slow-growing small islandeconomies unable to create jobs fast enough.

Generating employment opportunities fortens of thousands of school leavers is now anurgent issue on the Pacific’s post-2015development agenda. Otherwise a poorlandscape of opportunity could jeopardise thepotential of a generation whose public andeconomic participation is vital to progressingsustainable development in the region.

Youth unemployment is estimated at 23% in the Pacific Islands region, rising to46% in the Solomon Islands and 62% in theMarshall Islands, compared to the globalaverage of 12.6%.

IPS’s Catherine Wilson on why youthemployment is critical to sustainabledevelopment in the Pacific Islands

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“Youth unemployment in this country iscritical and one of our highest priorities,”Jennifer Fruean, chair of the National YouthCouncil in Samoa, a South Pacific Islanddeveloping state located northeast of Fiji, told IPS.

Approximately one quarter of Samoa’spopulation of 190,372 is employed andeconomically active and youth account forabout half of the remaining unemployed,according to government statistics.

“In the villages, I think that is where mostof the youth are static, but there is also a verynoticeable shift with urbanization that iscausing a number of youth to come to Apiaand they are becoming idle,” she continued.

Lack of sufficient job creation is affectingboth young people who lack adequateeducation, as well as those who possessqualifications and experience. The only routefor many of the latter is emigration to largereconomies, such as New Zealand, Australiaand the United States.

With 76% of those with a tertiaryeducation leaving, the country isexperiencing a ‘brain drain’ and 44.7% ofprivate sector employers are experiencingskills shortages, reports the InternationalLabour Organization (ILO).

Samoa’s economy, dependent onagriculture, fisheries, tourism andremittances, has been severely impacted inthe last 20 years by natural disasters. In 2012,Cyclone Evan devastated infrastructure andcrops resulting in economic losses equal to30% of GDP.

The global financial crisis also led towidespread formal sector job cuts in Samoawith waged employment declining from28,179 in 2006 to 23,365 in 2011 and privatesector jobs falling from 16,921 in 2007 to12,711 in 2010.

Only one-quarter to one-third of PacificIslanders finishing school are likely to secureformal sector employment, according to theUnited Nations Development Programme(UNDP). This leaves a high proportion of anestimated more than 5,000 school leavers eachyear vulnerable to exclusion in Samoa, whereformal sector employment is around 30%.

The social impacts of high teenagepregnancies and a low secondary schoolcompletion rate, with an estimated 35% of

more other people are entering theinformal sector”, as are “young peoplecoming out of college who are finding nojobs in the formal sector,” Williams added.

Fruean sees the same potential in Samoawhere two-thirds of young people aremaking a living through informal activities.

“There is so much potential in theinformal and agricultural sectors and weencourage the unemployed youth tobecome economically active in thesesectors”, for example, through organicfarming or creative production. The culturaland creative industries in the Pacific arereportedly growing at about 7% per year.

Also “the solution of co-operatives iscoming back because the cost of productionis so high. A lot of young people [in theCaribbean] are producing music alltogether, or somebody is writing it andsomebody is mixing it, so it is sustainable,”Williams said.

But if the informal sector is to play a rolein sustainable and decent job creation,training, skills, working conditions, valueaddition and production standards need tobe improved, she continued. Low-productivity subsistence activities also needto be up-scaled and developed, with greatermarket orientation and potential for exportbeing explored, where feasible. In theagricultural sector alone, which accounts fortwo-thirds of the workforce, only onequarter of production is for the market, withthe remainder for domestic consumption.

Many young people in the informalsector don’t have experience of budgetingand managing their money, and this is animportant area of awareness that needs tobe addressed, too, according to the SamoanNational Youth Council.

Efforts to galvanize the potential ofPacific Islander youth must be expanded toprevent increased poverty and inequality inthe next generation and the social fallout ofdisaffection when aspirations for productivelives are not fulfilled.

● Inter Press Service – IPS is an internationalcommunication institution with a global newsagency at its core, raising the voices of the Southand civil society on issues of development,globalization, human rights and the environment

this age group in Samoa not in education, arealso aggravating factors.

Fruean believes the main reason is theinability of families to pay school fees andsuggests the government’s introduction lastyear of fee-free secondary education will helpimprove the final year retention rate of 48%.

But there are also questions about thequality and relevance of education foremployment demand.

Institutions “are still bringing out lawyerswhen there is a desperate need here forelectricians and plumbers, and at theuniversity they are producing hundreds ofstudents with commerce degrees, but that is amarket adequately filled,” Fruean explained.

Somaya Moll, business, investment andtechnology expert with the United NationsIndustrial Development Organisation(UNIDO), advocates private sectordevelopment, which “basically enablespeople to take charge of their own lives [bygiving] them the tools to do so.”

“Self-sufficiency, ownership andaccountability are important and it is provento work,” she told IPS during the UnitedNations Third International Conference onSmall Island Developing States recently heldin Samoa’s capital, Apia.

The small size of Pacific islands and theirpopulations is a drawback for ‘economies ofscale’, keeping costs of production high. ButMoll said introducing entrepreneurshipawareness into school curriculums andencouraging financial institutions to considerthe creditworthiness of young people couldimprove the business environment.

The informal economy, which accountsfor up to 70% of economic activity in thePacific Islands and Caribbean regions, is apotential growth area, say regional experts.

“It has always been an important source ofsustainability [in the Caribbean],” DessimaWilliams from Grenada and Senior PolicyAdvisor for UNIDO said during an interviewat the UN SIDS conference.

“And what has happened recently is that,as the formal sector has crashed, more and

Opposite page:Students at theUniversity of theSouth Pacific,Suva, Fiji.

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Aruba is a small Caribbean island of just 193sq. km located 30 km north of Venezuela. A former Dutch colony, in January 1986Aruba gained status aparte, removing itselffrom the Federation of the NetherlandsAntilles. It gained autonomy over its internalaffairs, but remained part of the Kingdom ofthe Netherlands. Commercial and economicmatters are handled by the nationalgovernment, while the Netherlands retainspolitical control over Aruba’s diplomaticrelations and defence.

Aruba has a small and open economy.The island possesses few natural resourcesand is heavily dependent on imports,including food and manufactures. Its mainindustries are tourism, offshore financialservices, and transport (mainly shipping).Until recently, the economy also reliedheavily on a major oil refinery but it closedin 2012. Tourism grew rapidly from theearly 1990s and, as a consequence, tourism-related industries – particularlyconstruction – boomed, contributing to

strong economic growth and to a lowunemployment rate. Over 80% of theeconomy depends directly or indirectly ontourism, making Aruba the second highesttourism-dependent country in the world.

The global financial crisis in 2009 and theshutdowns of Aruba’s oil refinerytemporarily in 2010 and more permanentlyin 2012 led to an economic contraction butthe economy grew again 2013. The recoverywas backed by a strong growth in thetourism sector, and in 2014 the economy

Tourist-rich small island

ArubaCOUNTRYFEATURE

Head of state: King Willem-Alexander of theNetherlands, represented by a governor.National government: Arubaanse Volkspartij(AVP) – 13 seats. Opposition parties:Movimiento Electoral di Pueblo (MEP) – sevenseats; Partido Democracia Real (PDR) – one seat.Population: 110,000.Number of cruise ship passengers visiting in2013: 688,588Number of stopover tourist arrivals in 2013:979,256Percentage of stopover tourist arrivals from theUnited States in 2013: 57The solar park at the Reina Beatrix InternationalAirport in Oranjestad is the largest solar energysource in the Caribbean.

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has continued to be supported by a steadyupswing in tourism and tourism-relatedinvestment. Economic output could beboosted sharply again if efforts to partiallyrestart the oil refinery are successful.

The incumbent prime minister, MichielEman of the Arubaanse Volkspartij, isserving a second consecutive four-year termthat will run until September 2017. Thegovernment holds 13 of the 21 seats in thelegislature. Its greatest challenges remainimproving the island’s volatile economicperformance and stimulating employmentgrowth.

Economic policy is simultaneouslyfocused on stimulating tourism growth,with projects to boost investment in thissector, and on economic diversification toachieve sustainable growth and to reducethe risks caused by Aruba‘s greatdependence on tourism. The authorities arepursuing a new growth pillar anchoredaround the renewable energy sector and thepromotion of knowledge- and technology-intensive industries. Taking advantage ofAruba’s location and abundant solar andwind resources, the government has astrategy aiming to make Aruba moredependent on renewable energy; to turn itinto a gateway between South America, theUnited States and Europe for commerceand investment, and to establish researchlaboratories.

The Prime Minister has pledged that thegovernment will seek a transition to 100%renewable energy sources by 2020. Inrecent years Aruba invested US$300m tobuild a 20-turbine wind farm rated at 30mw that meets 20% of the island’s powerneeds. It replaced its old electric turbineswith more efficient models, and is buildinga solar panel park. Between 2006 and 2013Aruba reduced its imports of heavy fuel oilfrom 3,000 barrels per day to 1,700 barrels,saving some US$50m a year. The

construction of a second wind park due forcompletion in 2016 will mean renewableswill provide half of the island’s energy needs.

In April 2014, the government signed apartnership agreement with theinternational lighting company, RoyalPhilips, to revamp the island’s entire publiclighting system by completing an in-depthassessment and providing solutions forpublic buildings and outdoor lightingsystems. As part of the agreement, publicbuildings will be retrofitted with LEDlighting to realize the benefits of energyefficiency. Philips will design a tailoredsolution for outdoor living that allows Arubato maximize energy efficiency and improvecurrent lighting levels to internationalstandards. Philips estimates sustainablelighting could result in initial energy savingsof 50-80% and lower annual CO2 emissionsby 3,000 – 4,000 tons.

To demonstrate its commitment to thedevelopment of sustainable tourism, theauthorities have entered into an agreementwith the KLM airline to demonstrate theviability of aviation biofuel. For six monthsfrom May 2014, 20 KLM flights betweenAmsterdam and Aruba and theneighbouring island of Bonaire will bepowered by biofuel. The airline declared thatthe flights represent an important steptowards proving that more sustainableaviation is possible.

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“Economic policy issimultaneously focusedon stimulating tourismgrowth, with projects toboost investment in thissector, and on economicdiversification to achievesustainable growth andto reduce the riskscaused by Aruba‘s greatdependence on tourism.”

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How is Aruba transforming its economyfrom one that for most of the last 100 yearshas been heavily dependent on oil refiningand, more recently, tourism, to one that ismore diversified and more sustainable? The economy of Aruba is 70% dependent onthe tourism industry. Diversifying theeconomy and reducing Aruba’s reliance on asingle sector is integral to the government’slong term strategic goals. Aruba isdeveloping a new pillar of the economy – aknowledge economy – to bring greaterdiversification, economic stability, growthand sustainability. This important newpillar is based on Aruba’s initiative todevelop the island as a “Green Gateway”between Latin America and the EuropeanUnion in the areas of green technology,business support services and creativeindustries.

Aruba is making use of its proximity toLatin America and its knowledge of not onlythe language (Arubans speak Spanish, inaddition to Dutch, English and Papiamento)but of business practices and customs in theregion. As a member of the Kingdom of theNetherlands, Aruba also is relying on its

privileged legal and constitutional status asa member of this major trading countrywithin the European Union. And we arerefocusing on our historically close ties tothe United States as well. Exceptional UScompanies, such as Hyatt and Marriott, haveinvested in Aruba, and we want to attractequally stellar US companies in othersectors to invest in Aruba and to use Arubaas regional hub for green energy servicesand products.

In addition, Aruba has established acollaborative public-private-academic entityas a centre of excellence for tourism inAruba with the support of internationallyrenowned tourism education institutes inEurope and the Americas, as well as localAruban institutions. Finally, Aruba will bedeveloping highly skilled jobs as ittransitions to renewable energyHow successful has the Green Gatewayeconomic vision and policy for aknowledge-driven, entrepreneurialeconomy been, so far? Aruba is off to a very strong start. In a fewshort years, we have become recognized as aleader in the region for our efforts topromote sustainable prosperity and aknowledge-based economy.

Two Dutch organizations have alreadyestablished branch offices in Aruba and arecontributing to our knowledge-basedeconomy. TNO is a leading scientificresearch organization, and is not onlyworking in Aruba, but is also using ourisland as a regional hub to expand itsresearch and services in the area ofrenewable energy. The Gerrit RietveldAcademie, one of the top Dutch universities

of applied sciences for fine arts and design,has also established a presence in Aruba.

Schiphol International B.V. is managingthe Aruba Airport Authority N.V. KLM isusing Aruba as a hub for the region, and ithas already made its first flight using biofuelto Aruba. Royal Philips is partnering withthe government of Aruba to revamp theentire public lighting system in Aruba andretrofit all public building lights to LED.Several other international companies areactively considering Aruba as a site forregional expansion.What is the Smart Island Strategy, and howdoes Aruba plan to transform from thecurrent energy mix to one that is 100%reliant on renewable energy by 2020?Aruba views prosperity as not only materialsuccess but also as the quality of our livesand the health and happiness of ourfamilies. We have five-star hotels in Aruba,but we also want five-star schools, hospitals,elderly people’s homes, neighbourhoodsand a five-star quality of life. To create thetype of prosperity that also is sustainablemeans focusing on ‘doing more with less’, sothat creating prosperity today need notsacrifice the quality of life of futuregenerations.

A key component of our strategy – whatwe call a ‘Smart Island Strategy’ – forachieving this is to transition our island to100% renewable energy. Aruba’s earlysuccess in renewable energy projects hasattracted the interest of some powerfulstrategic partners, such as TNO and theCarbon War Room, the global initiativefounded by Sir Richard Branson and otherentrepreneurs. In cooperation with these

Interview with Prime Minister MICHIEL EMAN

A ‘green gateway’ betweenLatin America and Europe

MICHIEL (MIKE) EMANis the fifth Prime Ministerof Aruba and the currentleader of the ArubanPeople’s Party (ArubaanseVolkspartij, AVP). He isserving a secondconsecutive four-yearterm as prime ministerthat will run untilSeptember 2017. In 1992,he graduated with adegree in Netherlands

Antilles Law at theUniversity of theNetherlands Antilles. From 1992 to 2001, Emanworked as a deputy civil lawnotary and was co-founderof several companies andfoundations for politicalstudies. He enteredpolitics as a candidate forthe AVP in 2001 and waselected as leader of theparty in 2003.

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groups, we are developing an integratedstrategy to become one of the leadingcountries in the world in the use ofrenewable energy. This will not be easy.Wind and solar energy can only take us sofar because of intermittency issues, but wewill be looking closely at newer technologiesfor both energy production and storage, asthese become more reliable and costeffective.

In Aruba, we are looking forward toachieving our first ‘green hour’ of electricitycompletely generated by renewable energy,and then our first ’green week’, ‘greenmonth’ and so on, until we have achievedour ultimate goal.What can other small islands learn fromAruba’s experience?We in Aruba are trying to do what is rightand what makes sense for Aruba. If some ofthose lessons can be of benefit to other

countries as they embark on a similarjourney, then we would of course be veryproud. But each country is different andmust find its own way. Sir Richard Bransonand the Carbon War Room accepted thechallenge of the United Nations to take thelessons they learn from working in Arubaand to apply these in ten other island

nations. That is an exciting challenge, andwe would be honoured to play a role in thatendeavour.

I would not presume to advise othergovernments because each country isunique. One approach that has served Arubawell, however, is the process of socialdialogue – involving the community andstakeholders in any major initiative andsitting together to reach a consensus on theway forward. A challenge for many smallisland states is convincing the electric utilitythat it can happily co-exist with efforts tointroduce renewable energy. I get manyquestions from leaders of other islandnations about the cooperative and proactiveattitude of our electric utility company,W.E.B., and how that came about. We wouldwelcome the opportunity to share thelessons we have learned in Aruba, if othercountries feel this could be helpful.

“We are developingan integratedstrategy to becomeone of the leadingcountries in theworld in the use ofrenewable energy”

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Over the past 60 years, Haiti has received more thanUS$20bn in aid for reconstruction and developmentfrom the international community, but these large sumshave not helped the nation move out of poverty. Aroundthree-quarters of the population lives on less than twodollars per day, and more than half live on less than onedollar a day.

The failure of foreign aid in Haiti convinced 37-year-old entrepreneur Duquesne Fednard that he had to lookfor a solution. Talking to Making It magazine, he said,“Haiti has always been portrayed as a poor country thatrelies heavily on foreign aid, but we’ve seen little positive

D&E GreenEnterprises

In the latest of a series about remarkablecompanies, Making It speaks to the directorof a Haitian company manufacturingcookstoves that require half the amount of charcoal needed by traditional stoves.

impact on the ground. As a Haitian, I want to changethis image. I want to prove that we can solve our ownissues with our own hands.”

Fednard firmly believes that “the first step to get peopleout of poverty is to provide jobs”. So, after studying andworking for almost 14 years in the United States ofAmerica, he went back to his homeland, aiming to createa social business that would provide jobs for Haitians.

An idea had come to him during a business trip toGhana in early 2008 when he had been very impressedby the efficient charcoal stoves made by a localcompany, Toyola Energy. He thought that these stoves

D&E Green EnterprisesCEO, DuquesneFednard, (right)receiving the 2013Ashden Award forSmall IslandDeveloping States inthe Latin America andCaribbean region inrecognition of itsexcellence. The awardwas presented by S.Vijay Iyer, (left) Directorof the World Bank'sSustainable EnergyDepartment.

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could make a real difference for Haiti, where mostpeople use charcoal stoves to cook their food, spendingaround a quarter of their annual income on the fuel. In2009, he founded D&E Green Enterprises, whichproduces fuel-efficient cookstoves.

Setback and breakthroughIn January 2010, shortly after the establishment of thebusiness, a devastating earthquake struck southern Haiti,claiming more than 220,000 lives and leaving more than1.5 million people homeless. The newly-built factory inthe capital, Port-au-Prince, collapsed and nearly all theequipment inside was destroyed. Fednard was on theverge of giving up, but his employees refused to let himwalk away. In an interview with the BBC, he recalled themoment when he truly felt the responsibility of a socialentrepreneur, “One guy said to me, ‘This is the onlything right now that we were holding on to. Theearthquake took away our families and houses andeverything we own. You're taking the last thing that wewere counting on.’”

Realizing that it was no longer his business alone,Fednard decided to carry on. Without a factory, theproduction line was moved into two tents, whereworkers continued to make the stoves by hand. Despitethe setback, the company managed to produce and sellover 40,000 manually-made stoves by 2013.

This year, D&E is making a breakthrough. Withmoney from social investment and from his ownsavings, and a low-interest loan, Fednard, together withhis employees, successfully built a new factory. On 1 June, 2014, D&E Green Enterprises officially movedinto the new production site.

With most of the machines in place, D&E is moving tomechanized production. Between June to the middle ofAugust, 1,500 EcoRecho charcoal cookstoves wereproduced by newly trained workers. As Fednard toldMaking It, “The number may appear small, but it is atransition period for us to phase out the manualproduction process. Now each batch, we only make a fewhundred stoves, but this makes it easier for us to analysehow to produce stoves faster and better. After this testingprocess, we aim to have the capacity to make 3,000 to4,000 stoves per month by the end of this year. That is,around 40,000 stoves per year.”

D&E Green Enterprises currently employs 30 peoplefor the EcoRecho project. Asked whether machinemanufacturing will decrease employment opportunitiesfor Haitians, Fednard says he is not worried, “Machineswill enable more efficient production and moreconsistent quality. This will lead us to bigger markets, so eventually we’ll be able to provide more jobs.”

In Fednard’s plan, the fuel-efficient stoves produced byD&E will not only cover the whole Haitian market, but

A woman left homelessby the January 2010earthquake receiving anEcoRecho cookstove.

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also allow the start of exports to neighbouringcountries with similar conditions. The company is alsoexpanding into other sustainable energy technologies.For instance, in order to address the electricity needs ofrural Haiti, later this year it plans to launch, along withtwo partners, the first pilot plant using small-scalegasification to generate electricity from agriculturalwaste.

Recognition and awardsToday, D&E is a member of the Clinton Global Initiative,the UN Sustainable Energy for All initiative, and theGlobal Alliance for Clean Cookstoves. In 2013, D&E wonthe Ashden Award for Small Island Developing States inthe Latin American region in recognition of itsexcellence in the field of green energy. Since the award,Ashden has continued to support D&E, andinternational programme manager, Chhavi Sharma, saysthe company is making remarkable progress. “D&EEnterprises is doing incredibly important work toreduce fuel poverty and tackle deforestation in Haiti. We have been impressed by Duquesne’s sheer resilienceand determination to succeed against all odds, despitethe 2010 earthquake and the hurricanes that followed, aswell as the countless obstacles associated with doingbusiness in Haiti.”

Economically and environmentally viable The EcoRecho charcoal cookstove is the most popular ofD&E’s range of products that cater to customers withdifferent income levels and family sizes. The name‘EcoRecho’ states clearly the advantages of fuel-efficient,charcoal cookstoves: ‘eco’ stands for both ’economic’ and‘ecological’, and ‘recho’ is the word for a stove in theCreole language. The EcoRecho design is based on thatcreated by Ghana’s Toyola company but has beenadapted to Haitian users’ tastes and cooking habits. The biggest size stove serves a family with five membersand sells for US$12. The price is double that oftraditional charcoal cookstoves, but the EcoRecho stovesactually save customers money.

Firstly, compared to traditional stoves that lastbetween two to six months, EcoRecho stoves areexpected to have a lifespan of two years. Meanwhile,D&E promises a one-year quality warranty, a six-monthreplacement guarantee against faulty manufacture, aswell as a ‘money-back’ warranty, which, says Fednard,“means if the stove doesn’t save you money, bring itback”. Therefore, instead of buying two to six traditional

stoves each year, customers can now just buy oneEcoRecho stove every two years.

More significantly, use of an EcoRecho stove candrastically cut charcoal consumption, in many cases byas much as 50%. This translates to a daily saving of morethan 50 cents, meaning that the outlay to buy anEcoRecho stove can be recouped in just a few weeks. A recent United States Agency for InternationalDevelopment (USAID) study done on the EcoRechostoves shows that the 100 households that participatedsaved on average US$102 in energy costs over a yearwhen using EcoRecho stoves to cook one meal per day.This saving can make a real difference for the averageHaitian household. “With that saved one hundreddollars, people can start a small business, or parents cansend kids to school. That can really help them to escapepoverty.” Fednard said.

Burning less than half of the charcoal required bytraditional stoves, EcoRecho stoves also have a far-

reaching environmental impact. Haiti has a populationof around ten million, living as around two millionhouseholds, most of which use charcoal stoves. Theproduction of charcoal has contributed significantly tothe deforestation of Haiti, where 98% of forest cover hasbeen lost during the last half century.

According to Fednard, each year every Haitianhousehold uses one and half tonnes of charcoal,produced from around five tonnes of wood andcreating three tonnes of carbon emissions. “By cutting

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“A recent USAID study done on theEcoRecho stoves shows that the onehundred households which participatedon average saved US$102 in energycosts over a year when using EcoRechostoves to cook one meal per day. Thissaving has a significant meaning formost of Haitian households, whoseannual income is around US$700.”

MakingIt 41

charcoal use in half, EcoRecho stoves can make a realimpact on the environment in terms of saving forestsand greatly reducing CO2 emissions.”

Meanwhile, by cutting charcoal consumption, theEcoRecho stove reduces indoor air pollution, thuscreating a safer and healthier cooking environment forthe users. According to the WHO, indoor air pollutioncaused by burning solid fuels is associated with a widerange of health problems. In particular, there is strongevidence that it increases pneumonia and other acutelower respiratory infections among children under fiveyears of age, and chronic pulmonary disease and lungcancer among adults over 30.

Spearheading social entrepreneurship The workers who manufacture EcoRecho cookstoves allgo through three months of training before working onthe stoves. D&E not only trains them to operate the newmachines, but also educates them on environmental,health and safety, and other human development issues.

In Fednard’s words, D&E is implementing “a group ofholistic concepts”, which is relatively new for Haitianbusinesses. In addition to paying a decent salary, thecompany also plans to offer one meal a day, healthinsurance and stipends for education. “What I am reallytrying to show is how a social business can helpsomeone move out of poverty. We give them a job.

That is the first step because you restore that sense ofdignity and hope in that person; but we also need toeducate them, to help them stay healthy and to providethem with a platform to grow. So we are aiming toprovide a dignified path out of poverty by taking aholistic approach,” Fednard said.

Since the D&E business model looks at the entirechain, it allows other people to make money. Thecompany only manufactures stoves and sells them todistributors, who then make a profit by selling the stovesto end users. The distributors are also trained by thecompany on stove use, business management andmarketing. According to Fednard, the 20 distributorstrained by D&E earn around US$1,000 a year each fromstove sales, which is a remarkable income increase forthem. Additionally, the stoves are manufactured locallyusing local raw materials, thus creating jobs and otherbusiness opportunities for Haitians.

Fednard is convinced that the future of Haiti dependson Haitians, and social entrepreneurs like himself,taking charge. “We can’t rely on direct foreign aid ornon-governmental organizations; rather, we need tomake social business part of aid, because only social-oriented business allows people to escape poverty. Thatis where you see the greatest return and the greatestimpact.” ● Interview by ZHONG Xingfei

When the D&E GreenEnterprises premiseswere destroyed by the2010 earthquake, theproduction line wasmoved into tents,where workerscontinued to make thecookstoves by hand.

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MakingIt42

POLICY BRIEF

By SEKITA GRANT, Associate, Advisory Services,BSR (Business for Social Responsibility)

When it comes to helping the worldtransition to a low-carbon future,developing nations are in a uniqueposition to lead – but they can’t do it alone.Investments are needed. Luckily, theopportunities are promising for climate-savvy investors and companies withoperations in the developing world.

In developing countries, low-carboninvestments, such as those in energy-efficiency upgrades and low-carbontransportation, can open new markets forclean technologies and sustainableproducts while reducing pollution in localcommunities, ensuring energy and foodindependence by supporting local anddistributed sources of power andagriculture, and alleviating poverty byproviding new job opportunities. Manycountries are already taking advantage ofthese opportunities. Ethiopia, for example,is using a green growth strategy to eradicatepoverty and address climate change. Toenhance these opportunities, globalcompanies and investors can play a key role.

There are four reasons why globalcompanies should consider investmentsin the developing world to mitigateclimate change:

1) Government spending on climate ison the rise. In anticipation of new policypriorities that could be set in 2015 at theUnited Nations Conference of Parties inParis, the international community ispoised to invest billions of dollars in cleanenergy, much of it in developing nations.During the UN Climate Summit 2014 inNew York, leaders announced plans toinvest more than US$200bn to financeclean energy and support resilienceamong vulnerable nations. In its new“Better Growth, Better Climate Report,”

the Global Commission on the Economyand Climate calls for governments totriple their investments in clean energyresearch and development. Theinternational community also isincreasing financial innovations such asgreen bonds, feed-in tariffs and risk-sharing instruments.

2) Climate investments are paying off.The World Bank estimates that mostinvestments required to address climatechange in the energy sector will eventuallypay for themselves. BSR (Business forSocial Responsibility) has seen this first-hand in its Energy Management in ChinaProgramme, where investments in energy-efficiency upgrades in companies have ledto both cost savings and greenhouse gasreductions for manufacturers and localcommunities. As more states and sub-nationals put a price on carbon, these low-carbon investments are in a position tobecome even more lucrative.

3) Investments in sustainableinfrastructure are a relative bargain. It iseasier to build new low-carboninfrastructure than it is to transformfossil-fuel-dependent systems. Asvulnerable populations develop, there isan opportunity for them to shape theirenergy future with sustainabletechnologies such as electric vehicles anddistributed renewable energy generation.The US and Europe are now dealing withthe expensive challenge of upgrading theirelectricity grids, while the Indian state ofGujarat, with its less centralized powergeneration, has been able to spur rapidrenewable energy development.

4) There’s less cultural resistance in thedeveloping world when it comes to low-carbon solutions. Many developingnations are more open than are developednations to low-carbon transportation,historically relying more on affordableoptions such as walking, cycling, animalpower, ride sharing and transit services.

With more investment,the developing worldcan lead the way to alow-carbon future

“There is a strong case for thebusiness community to focuson the developing world whenit comes to investments inlow-carbon initiatives. Doingso will not only serve thecompanies’ business interests,but will help pave the way tothe “cleaner, greener, moreprosperous future for all’.”

MakingIt 43

POLICY BRIEF

In these regions, there is less of a need toovercome cultural resistance that presentshurdles in countries like the United Statesand Australia, where urban sprawl anddependence on fossil fuel–basedtransportation is a cultural norm. Even inChina, where bicycles and pedestrianstraditionally dominated city landscapes, aculture of car-dependent urbanites hasemerged – with car ownership uptwentyfold in the past decade. Investorscan counteract this trend in China and inother developing nations by marketinglow-carbon transportation options, whichcan also open up markets for cleantechnologies and catalyze a highlyefficient mobility system that will increasethe countries’ economic productivity.

Despite these opportunities,investments in developing nations can becomplex. To lower risk and ensurecommunity support, it is important forcompanies to engage in an inclusive androbust stakeholder process that respondsto community development needs andsustainable growth priorities.Engineering and electronics companyHitachi did this successfully in its globalbusiness strategy, which emphasizedextensive stakeholder input to helpaddress global sustainability challengessuch as energy use, urban development,health care and water scarcity in emergingmarkets such as Brazil, China andIndonesia.

There is a strong case for the businesscommunity to focus on the developingworld when it comes to investments inlow-carbon initiatives. Doing so will notonly serve the companies’ businessinterests, but will help pave the way to the“cleaner, greener, more prosperous futurefor all” that UN Secretary-General Ban Ki-moon talked about in his opening dayremarks for New York’s Climate Week2014. But, as Ban also pointed out, “We donot have any time to waste now.”

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MakingIt44

POLICY BRIEF

By CAROLINE ASHLEY, editor of thePractitioner Hub for Inclusive Business

Can start-ups scale? Can social enterprisesreach sufficient millions of people toreally crack problems of poverty? Thisquestion has been around for many years.Now, first answers are emerging.

A crop of ‘breakthrough’ socialenterprises are emerging. They are growingfast, securing investment and partners, andreaching millions of people. Of course theydo not prove that all social enterprisesscale, but they certainly show that they can.

Five years ago, some had an assumption,some a question: start-ups are great forinnovation, but do we need to rely on largeand multinational companies to reachscale? Emerging evidence suggests‘probably not’. Data today does not provethe opposite – that small and medium-sized enterprises (SMEs) are better thanmultinationals for scale – but it doeschallenge those initial assumptions.

An important source of data is therecent review of the portfolio of theBusiness Call to Action (BCtA), BreakingThrough – Inclusive Business and the BusinessCall to Action Today, conducted by BCtAwith a team from Ashley Insight. Half ofthe 94 member companies are large ormultinational, for whom their inclusiveinitiative is one of many business lines.Half are ‘emerging and maturing’companies, whose business is young, and

premised on engaging the Base of thePyramid (BoP). The term ‘small andmedium’ is beginning to be tooconstraining to include all the ‘emerging’companies. Take ZHL Ambulance Servicein India as an example: founded in 2005,they now have over 5,000 employees, a totalthat does not fit most definitions of ‘SME.’

Comparing these two groups ofcompanies, the findings are reallysurprising:● In terms of revenue, the emerging andmaturing companies are outperformingthe inclusive business initiatives of thelarge companies.● In terms of reach to people at the BoP,the emerging and maturing companiesare matching the large companies fornumbers reached.

Not surprisingly, both groups ofcompanies have some that are progressingslowly and some flourishing. Theemerging and maturing companies havemore at either end of the spectrum(‘progressing slowly’ or ‘flourishing’),whereas initiatives of large companies aremore often perceived (by the company) tobe ‘on track’. Several of the emerging andmaturing companies are in finance, energyand health, which are sectors that showhigh potential, though also some failures.

In the energy sector, SolarNow is a greatexample of a ‘breakthrough SME.’ In aninterview for the report, CEO, WillemNolens, explained that consumer

financing, product quality, and local word-of-mouth – and definitely not an NGO ordonor-led approach – have been critical forbuilding the foundations for success.

The role of finance is key. We often hearhow hard it is for SMEs to access financeand how hard it is for investors to findinvestable propositions. So it is great tohear that SolarNow have just closed a €2mequity investment, which will financefaster growth and geographic expansion.

Another breakthrough SME, WasteCapital Partners, has even moreastonishing news: their first investmentround was so successful that they wereturning away willing investors. WasteCapital Partners received a seed grantfrom Sida’s Innovations Against Povertyprogramme (IAP) some years ago: at thetime, it was an innovative company thatinitially barely registered on the IAPmonitoring metrics for revenue ornumbers served. Now, Parag Gupta, theirCEO, credits that early, risk-tolerant grantfinance from IAP as critical for crossingthe gap to where they are today, rolling outacross multiple Indian cities.

For other breakthrough SMEs, abusiness-to-business partnership can bethe key that unlocks scale. For example,ClickMedix’s partnership with Medtronic,a global medical device manufacturer, isthe driver of fast growth for ear-screeningservices that harness the mobile-enabledapplications and connectivity ofClickMedix.

A new driver of growth has been spotted,and this is really good news. We alwayshear about regulatory constraints. Thereare now cases where positive regulationcontributes to growth of these emerginginclusive businesses. Empower Pragati inIndia has benefited tremendously fromgovernment support for vocationaltraining of low-income youth.

The stories tell of energy andenthusiasm. What does the data show? The

Reaching scale: start-ups to challengeour assumptions

MakingIt 45

POLICY BRIEF

graphic shows amalgamated data fromthe last year for 76 emerging ormaturing companies in three inclusivebusiness portfolios: BusinessInnovation Facility pilot (2010-2014),Innovations Against Poverty (2011-2013)and Business Call to Action (ongoing). Itshows what we expect: annual revenuevaries widely. Plenty are still at zero toUS$10,000, but almost as many arebetween US$1m and US$10m per

annum. The common theme across allthese portfolios is that it takes time –about a decade – to get the model rightand scale. But at least we now haveevidence emerging that some of themare getting there.

We don’t want to fall into the trap ofover-hype. We’ve had too much of that.We’ve seen at least one well-knowninnovative company win plaudits at theAshden Awards, but then disappear,

and plenty of others that never quite gotoff the ground.

The breakthrough SMEs still representa fraction of the total BoP market and allcompanies trying to expand in this spaceface huge obstacles. But where evidenceexists, let’s share it, review it and learnfrom it. It is clear that the journey is long,and that every business model takes timeto get right. It is also clear that it is notimpossible.

19 companies:annual revenueof $0-$10,000

13 companies:annual revenue of$10,000-$100,000

17 companies:annual revenue of$100,000-$1m

18 companies: annual revenue of $$1m-$10m

3 companies: annual revenue of $10m-$100m

Measured at themost recent data

point submitted, ineither 2013 or 2014.

MakingIt46

ENDPIECE

As a taster for the next issue of Making Itfocusing on urbanization, CHARLES ARTHURlooks at the challenges faced by Malé, thecapital of the Maldives.

The Republic of Maldives is an islandnation in the Indian Ocean consisting of adouble chain of twenty-six atolls. Thecapital and largest city is on the island ofMalé, located at the southern edge ofNorth Malé Atoll. According to the 2014census, there are 153,379 people living onan area of just two square kilometres,making Malé one of the most denselypopulated islands in the world. Such adensity is problematic in itself, but Maléfaces a host of other challenges arisingfrom the fact that, as there is nosurrounding countryside, everythingneeded in terms of infrastructure has to belocated in the city.

The supply of water to meet the needs ofso many people living on a small island isan obvious challenge. Traditionally, thecity has relied on rain and groundwater.However, as the population increased insize, the island began to run out of spacefor facilities to store rain water, andgroundwater became increasinglyunsuitable for drinking as a result ofcontamination from sewage and higherlevels of salinity caused by seawaterleaking into wells.

In 2010, the Japanese multinational,Hitachi, acquired 20% of the shares in thestate-owned Malé Water and SewerageCompany and since then has beenworking on comprehensive andsustainable solutions to address the waterchallenges facing the island. Hitachi’sAqua-Tech Engineering company hassupplied desalination systems that use

reverse osmosis, a process in whichpressurized seawater is pushed through asemi-permeable membrane which acts as afilter to remove the salt.

Solid waste management is anotherenvironmental challenge. In 1992 theMaldivian government took action to tryand resolve Malé’s growing wastemanagement problem by authorizing thetransport of the capital’s rubbish toThilafushi, a lagoon formed by shallowcoral reef, situated seven kilometres to thewest of Malé. Each day, barges deliveredaround 330 tons of refuse, whichunderwent a rudimentary sorting and wasthen tipped into the shallow lagoon watersto create new land, a process known as landreclamation. In time, an artificial island,seven kilometres long by 200 metres wide,known to locals as ‘Rubbish Island’, wascreated. The Thilafushi ‘solution’ soondeveloped into a new problem, as smokefrom burning plastic sometimes blewtowards Malé and toxic waste frombatteries, asbestos, lead and electronicgoods began leaking into the sea.

As the first step towards developing anational solid waste management system,in 2008 the Maldives governmentannounced a partnership with the WorldBank, which provided a loan of $US13.8mto establish the Maldives EnvironmentalManagement Project. Operated by theMinistry of Environment and Energy, themain objective of the project was todevelop a socially and environmentallysustainable system of solid wastemanagement by developing a communityparticipatory approach, and designing and implementing island wastemanagement centres and regional wastemanagement facilities.

City on the sea

Fifty percent of the project’s fundingfocused on setting up a waste managementsystem in the northern region of theMaldives, with a strong focus oncomposting organic waste at island leveland separating recycled waste for reuse orresale. A new waste management centre onthe island of Vandhoo, which is due tobecome operational in 2014, will useenvironmentally friendly incineration todispose of waste, with unrecyclableincinerated ash stored in cells to preventchemicals leaking into the water. Incontrast to what happened at Thilafushi,the facility at Vandhoo will not allow openburning, the disposal of mixed waste orthe use of refuse for land reclamation.

A third challenge is providing a supplyof energy. Malé, and the rest of theMaldives, have been dependent onimporting diesel to generate electricity. As part of the government’s drive toincrease the amount of electricityprovided by renewable sources, in 2012 an

Malé, thecapital of theMaldives.

ENDPIECE

MakingIt 47

Inter-American Institute for Cooperation onAgriculture (IICA) – Investing in Agro-tourismDevelopment in the Caribbean Region

The Republic of Nauru/AOSIS – Tackling the Challengeof Climate Change: A Near-term ActionableMitigation Agenda

Small Island Developing States Accelerated Modalitiesof Action (S.A.M.O.A. Pathway)

United Nations Cape Verde – An Emerging NationUnited Nations Environment Programme – GEO:

Small Island Developing States OutlookUNOHRLLS – Small Islands, Bigger StakesWorld Tourism Organization – Challenges and

Opportunities for Tourism Development in SmallIsland Developing States

http://sids-l.iisd.org – SIDS Policy & Practice is aknowledge -management project on UN andintergovernmental activities addressing small islanddeveloping states

www.aosis.org – The Alliance of Small Island States(AOSIS) is a coalition of small island and low-lyingcoastal countries that share similar developmentchallenges and concerns about the environment,especially their vulnerability to the adverse effects ofglobal climate change

www.canari.org – The Caribbean Natural ResourcesInstitute promotes participatory natural resourcemanagement in the Caribbean

www.carbonwarroom.com – The Carbon War Room isa global, independent non-profit with a mission toaccelerate the adoption of business solutions thatreduce carbon emissions at gigaton scale andadvance the low-carbon economy

www.creativeindustriesexchange.com – The CreativeIndustry Exchange provides a regional frameworkfor the collection, collation and dissemination ofdata and information on the cultural/creativeindustries in the Caribbean

www.forumsec.org – The Pacific Islands Forum is apolitical grouping of 16 independent and self-governing states

www.sids2014.org – The SIDS Action Platform supportsthe follow-up to the Third International Conferenceon Small Island Developing States

www.sidsdock.org – SIDS Dock is an initiative toprovide SIDS with a collective institutionalmechanism to assist them transform their nationalenergy sectors into a catalyst for sustainableeconomic development and help generate financialresources to address adaptation to climate change

www.sidsnet.org – SIDSnet is an online platform forsharing knowledge and motivating action towardsthe sustainable development of small islanddeveloping states

www.sprep.org – The Secretariat of the Pacific RegionalEnvironment Programme has been charged by thegovernments and administrations of the Pacificregion with the protection and sustainabledevelopment of the region’s environment

MakingItIndustry for Development

FURTHER READING

FURTHER SURFING

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greenhouse gas emissions, it is amongthe most susceptible to impacts of thechanges in climate. With an averageground level elevation of 1.5 metresabove sea level, the Maldives is theplanet's lowest country. It is also thecountry with the lowest natural highestpoint in the world, at 2.4 metres. A breakwater has been constructedaround Malé at a cost of aroundUS$30m and the government has alsotaken action to protect the coral reefsby reducing import duty onconstruction materials andprohibiting the use of coral forgovernment buildings and touristresorts. However, the magnitude of sealevel rise projected in theIntergovernmental Panel on ClimateChange (IPCC) Fifth AssessmentReport – between half a metre and onemetre by the end of this century –threatens the very existence of life andlivelihoods in the Maldives.

agreement was reached with Japan’sInternational Cooperation Agency (JICA)for a three-phase ‘Project for CleanEnergy Promotion in Malé’. A Japanesecompany, the Kyocera Corporation,installed solar panels at twelve school,university, hospital and governmentbuildings, which together can generate740 kilowatts of electricity. Speaking atthe project’s completion in May 2014,the Maldives’ Minister of Environmentand Energy, Thoriq Ibrahim, noted thatthe Maldives spent close to US$487m –equivalent to 30% of its Gross DomesticProduct – on the import of oil in 2013,and said that it was essential that thecountry find ways to reduce itsexpenditure on unsustainable energy.

Perhaps the greatest challenge Maléfaces – but one that it can do littleabout – is the prospect of rising sealevels resulting from climate change.Although the Maldives contributes aminimal 0.001% to the global

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