FCDO Memorandum on the International Development Committee Inquiry on the UK Small Island Developing States Strategy

 

  1. Summary

Small Island Developing States (SIDS) are vital partners for the UK. The UK is driving action to ensure that the international community supports its most vulnerable states, such as SIDS, to build resilient and prosperous futures. The UK’s International Development Strategy sets out our vision that SIDS will be more climate and economically resilient by 2030. The UK SIDS Strategy outlines steps to deliver this by supporting and partnering with SIDS. The UK recognises that small scale and limited capacity, disaster risks, and economic challenges of SIDS justify their UN status as a `special case for sustainable development.’[1] The strategy is complemented by the UK’s regional approaches in the Caribbean, Pacific and Africa and Indian Ocean regions, and wider climate action and finance reform efforts.

The UK SIDS Strategy and the International Development Strategy recognise that the UK will not achieve change alone – partnerships with SIDS and development partners are essential. The international system must work more effectively for SIDS, reducing barriers to, and improving quality of, support. The UK works closely with SIDS leaders, such as the Alliance of Small Island States (AOSIS), currently chaired by Samoa, and development partners (including Canada, Australia, New Zealand) as well as Antigua and Barbuda as the host of the once-in-a-decade 2024 UN 4th International Conference on SIDS.

The 2024 UN Conference is a major opportunity. SIDS are seeking ambitious outcomes and it will set the international programme of action for SIDS going forward. The UK is a leading supporter of the process both by facilitating policy dialogue and pressing further action on climate and finance reform. For example, in April 2023, the UK hosted a thematic meeting on access to climate finance and the UN Conference at Wilton Park. The Foreign Secretary also hosted a reception for SIDS leaders in the margins of the Coronation, setting the UK’s ambition to drive action to better support vulnerable SIDS.

 


  1. What are the common features of, and common challenges facing Small Island Developing States?

 

The UK SIDS Strategy is informed by the UN list of SIDS. The UK recognises that this represents a heterogenous group, and that the UN list does not capture some vulnerable micro-population SIDS. Our development focus is on the most vulnerable SIDS that share a combination of climate and economic challenges. UN recognition that SIDS are a special case for sustainable development highlights that these vulnerabilities undermine their efforts for sustainable development and fuel their frustration with the international system.

 

SIDS are among the most vulnerable developing states due to the low capacity of small state systems, narrow economies, diseconomies of scale,[2] high trade dependence, high indebtedness, and high disaster risks. Upper Middle Income Country (UMIC) SIDS are 73% more vulnerable than non-SIDS UMICs (OECD, 2018).

SIDS are disproportionately affected by the impacts of climate change despite contributing a negligible fraction of the world’s emissions. They face worsening extreme weather events and two SIDS may disappear this century due to rising sea levels, with communities in low-lying atoll countries such as Maldives, the Marshall Islands, Kiribati and Tuvalu at highest risk. SIDS also steward unique biodiversity, including nearly a third of the world’s oceans. SIDS have some of the highest damages from disasters, with average annual damage at 2.1% of Gross Domestic Product (GDP) (UNCTAD, 2020). Their biodiversity is fragile and the low capacity of small state systems constrains action on ocean management and conservation.

SIDS are structurally characterised by remoteness and diseconomies of scale, far away from large consumer markets and with small domestic markets. These characteristics result in SIDS’ trade dependence, with trade accounting for over 71% of small island economies’ GDP, compared to 50% for Least Developed Countries (LDCs) (UN, 2020). SIDS tend to have small, narrow economies, concentrating output where they have advantages, particularly tourism and primary commodities. Travel services account for almost half of exports, and for five SIDS, seafood accounts for over 70% of goods exports (UNCTAD, 2021).

High debt burdens are a major risk for SIDS, in a 2021 report the OECD stated that:
‘prior to the COVID-19 crisis, eleven out of twenty-two SIDS[3] already had solvency problems: they were qualified as high risk or being in debt distress. However, the crisis [COVID-19] is generating liquidity impasses that could magnify existing solvency problems or create new ones.’ In 2019, SIDS were already on average more indebted than other developing countries (OECD 2021).

SIDS vulnerability to external economic shocks has been demonstrated by the impacts of the COVID-19 Pandemic and Russia’s illegal war on Ukraine. In the wake of the pandemic in 2020, SIDS GDP fell 9% compared with 3.3% in other developing countries based on International Monetary Fund projections data (UNCTAD, 2021). SIDS, and other small states, have economically suffered most from the COVID-19 pandemic and are recovering slowest (WB, 2023). Some were hit particularly hard due to dependence on tourism. For Fiji, tourism accounts for nearly 40% of GDP; an in 2020 visitor arrivals fell by 87% and the economy plummeted by 19% (WB, 2022). 

SIDS have also been disproportionately affected by Russia’s illegal war on Ukraine. Typically, food and fuel imports are equivalent to about one-sixth of GDP in small states, substantially more than in other emerging and developing economies. Rising import prices pushed up inflation in 2022 despite persistently weak domestic demand. In the Caribbean region, 80-90% of food is imported (WB/IICA, 2021). In the wake of the illegal invasion of Ukraine, from February to August 2022, food insecurity in the English and Dutch-speaking Caribbean increased dramatically by 48% to 57% of the population while 9% are severely food insecure (CARICOM/WFP, 2022).

SIDS tend to have limited government capacity but carry high government costs relative to the small size of the economy due to the fixed costs of public administration. The average share of GDP for both annual government spend and tax revenues are 8% higher in small states than other emerging and developing economies (WB, 2023). This also limits SIDS’ capacity to manage complex governance threats including organised crime and illicit finance.

Due to their vulnerabilities and risk profile, SIDS struggle to attract non-concessional/commercial finance and are more reliant on concessional finance than other developing countries. At the point of Official Development Assistance (ODA) graduation,[4] SIDS are on average dependent on ODA for 26% of external finance, compared to a negligible 1% for other graduating countries.

Addressing SIDS vulnerabilities entails recognition that climate and economic challenges, combined with low capacity, constrain SIDS in addressing climate change and delivery of the Sustainable Development Goals (SDGs). Supporting delivery of climate adaptation, enabling sustainable economic diversification, and supporting capacity are therefore integral to the UK vision for economic and climate resilience.

 

 

 


  1. Is the Strategy coherent with the UK’s wider foreign policy and development goals, as outlined in the recent Integrated Review Refresh?

 

The UK SIDS Strategy supports and aligns with the UK’s wider foreign and development objectives. The strategy delivers across the pillars of the Integrated Review Refresh, in particular the pillars ‘shape the international environment’ and ‘generate strategic advantage’. Actions laid out in the Integrated Review Refresh, including the Indo-Pacific Tilt and strengthening the Commonwealth, as well as thematic priorities around climate change, sustainable development, and international financial reform are most relevant.

 

The UK Government’s Strategy for International Development sets out the vision for SIDS:

 

Our vision is that by 2030 Small Island Developing States (SIDS), will have the economic and climate resilience not only to graduate from ODA with sustainable economies, but also to withstand economic and climate shocks. The UK will continue to work to help SIDS make best use of international aid and finance and improve how it works for them. 

 

The UK SIDS Strategy provides the detail to deliver on this vision by supporting efforts to address climate change, enable more resilient economies and work with our SIDS partners on capacity issues, recognising that these efforts depend on securing action by others.

 

The Integrated Review Refresh sets out a thematic priority on sustainable development and the delivery of the International Development Strategy. The Integrated Review Refresh points to the need for quality of effort, long-term partnerships and focusing on the needs of the countries with which the UK works. The UK SIDS Strategy sits within this approach to development, focusing on delivery of key climate and international reform goals. The Integrated Review Refresh highlighted that a reformed global financial system will better meet the needs of developing countries. The UK SIDS Strategy recognises that SIDS are a key group for reform and greening of finance. Nearly half of ODA eligible SIDS are in, or at risk of, debt distress and are on average more dependent on ODA than their peers. The UK is ensuring that international finance reforms – a key FCDO drive this year – delivers for SIDS.

 

Our work to improve resilience of SIDS in the Pacific is important for delivery of the Indo-Pacific Tilt vision for a free and open Indo-Pacific region. The UK is deepening engagement with Pacific Island Countries. The approach is based on principles of sustained and long-term engagement and genuine and equal partnership with the countries of the region and their regional institutions. The focus is where the UK has expertise which complements the work of other partners, and use our influence to support Pacific countries’ priorities, for example on faster, easier access to climate finance. This is complemented by targeted UK funding to support the Pacific to tackle climate change, protect the ocean, respond to disasters, increase economic growth, and support open societies and free media.

 

The Integrated Review Refresh sets out the UK’s intention to strengthen the Commonwealth, as an organisation that accounts for over a quarter of the membership of the UN and a champion of values at the heart of an open international order. SIDS are a vital part of this, making up nearly half of the membership of the Commonwealth. As part of the UK SIDS Strategy emphasis on economic diversification and multilateral reform, the UK supported the development of the 2022 UN-Commonwealth advocacy strategy on small states. The initiative is focused on three themes: (i) economic vulnerability; (ii) climate action; (iii) access to finance and debt sustainability. Delivery of the Commonwealth initiative is supported by champions, with Minister Mitchell acting as an advocacy champion focused on economic vulnerability. Priorities in this area are to gain recognition of small states’ economic vulnerability, and for major donors, international financial and development institutions to agree on a consistent definition and measurement of economic vulnerability. Much of this work is coordinated through the Commonwealth Small States Forum, which meets in the margins of the Commonwealth Heads of Government Meeting.

 

The Integrated Review Refresh underlines the continued UK commitment to climate action. Support to SIDS in addressing climate change is important to the UK’s climate ambitions and the commitments secured at COP26. SIDS play a leading on climate action due to their unique moral voice and climate vulnerability. The UK has aimed to drive support on their climate adaptation and mitigation priorities and to amplify their voices. At COP26 for example, the UK provided extensive political and logistical support, providing a platform for their leaders and negotiators. The UK is supporting SIDS climate objectives including seeking to agree a framework for the Global Goal on Adaptation in 2023, facilitating progress on Loss and Damage, and driving implementation of the Global Biodiversity Framework.

 

Action on climate finance also further supports our Integrated Review Refresh ambition for greener and more effective international finance. For example, the Taskforce on Access to Climate Finance was launched in 2021 by the UK, Fiji and others with the aim of transforming access to climate finance. It has launched pilots in six countries (including Mauritius, Fiji, and Jamaica). The Partners in the Blue Pacific is an informal initiative including Australia, Canada, Germany, Japan, New Zealand, the Republic of Korea, the United Kingdom, and the United States. The initiative is dedicated to coordinating support for the delivery of Pacific Island Country priorities, notably delivery of the Pacific Islands Forum’s 2050 Strategy for the Blue Pacific Continent. The UK is leading the work on improving access to climate finance.

 

 


  1. A) Do the six priorities outlined in the UK Government’s SIDS Strategy address the key issues facing SIDS?

 

 

The priority areas outlined in the UK SIDS Strategy were guided by consistent collaboration and dialogue with SIDS. The priority areas are also built on analysis of SIDS’ unique climate and economic vulnerabilities. These vulnerabilities are mutually compounding, as a result, sustainable development in SIDS depends on action across multiple sectors. The priority areas summarise programmatic and multilateral action on vulnerability, but do not represent the full spectrum of UK interests and engagement, given our national and regional level priorities and wider diplomatic and political relations with SIDS.

 

The priorities are consistent with the Small Island Developing States Accelerated Modalities of Action (SAMOA Pathway) 2014 – the outcome document from the last UN International Conference on SIDS.[5] More recently, the Alliance of Small Island States (AOSIS) Leaders’ Declaration 2021 reaffirms endorsement of an approach that recognises that SIDS are a special case for sustainable development and renews commitment to the implementation of the SAMOA Pathway. In 2020 and 2021 the UK also co-organised a consultative series of roundtable discussions with SIDS and development partners on areas for reform. Priority areas outlined in the Strategy feature in the SAMOA Pathway, with renewed emphasis on climate change, ocean and biodiversity, economic diversification, debt, and multilateral modernisation in the AOSIS Leaders’ Declaration 2021.[6]

 

Climate Change and Natural Disasters: The SAMOA Pathway recognises that sea-level rise and other adverse impacts of climate change continue to pose a significant risk to SIDS. Adaptation to climate change and recovery from increasingly severe weather events places additional burdens on national budgets. SIDS consistently use their voices through the United Nations Framework Convention on Climate Change (UNFCCC) and other international fora to raise awareness of the existential threats and impacts of climate change and to advocate for increased climate action. This priority area encompasses the UK’s support for global action across the Paris Agreement goals of mitigation, adaptation and climate finance, and disaster risk finance, including action on energy security and water security. Demand for support and evidence generated through programming such as the Climate Ambition Support Alliance (CASA) and the Nationally Determined Contributions Partnership and consultation including the COP26 roundtable process on Access to Finance for SIDS demonstrates the ongoing and increasing issues SIDS face due to climate change.

Ocean and Biodiversity: The SAMOA Pathway dedicates a section to Oceans and Seas, recognising that SIDS have large marine areas and have shown leadership in conservation and sustainable use of these resources. This priority area addresses key issues facing SIDS by linking ocean action for climate resilience, conservation of biodiversity, sustainable fishing for food security and nutrition, and economic diversification in ocean-industries for economic resilience where the UK has integrated support, including through the Blue Planet Fund.

Economic Diversification and Prosperity: Trade, economic diversification, and sustainable development feature extensively in the SAMOA Pathway and AOSIS Leaders’ Declaration 2021. This priority area brings together the challenges faced by trade-dependent and narrow SIDS economies that are often reliant on a single source of export income to encompass our work on economic resilience, diversification and trade for sustainable development including British International Investment (BII) and Economic Partnership Agreements (EPA).

Debt: The AOSIS Leaders’ Declaration 2021 expresses concern that the external debt stocks of SIDS continue to increase, while the ability of SIDS to self-insure against exogenous shocks deteriorates and calls upon partners to adopt more progressive approaches. This priority area recognises that, like many developing countries, many SIDS are struggling with high debt vulnerabilities exacerbated by COVID-19 and the global economic impacts of Russia’s illegal war. The UK is committed to addressing developing country debt vulnerabilities (including for SIDS) through multilateral coordination on debt resolution, including through the Paris Club and G20-Paris Club Common Framework.

Inclusive Governance and Shared Values: The SAMOA Pathway affirms the importance of freedom, peace and security, and respect for human rights including respecting the rule of law, promoting gender equality, and reducing inequalities. This priority area outlines the UK’s commitment to just and democratic societies for development, which is aligned with the values of the SIDS with which the UK partners. Our shared values are represented throughout the Principles for Improving Development Impact in SIDS, developed with SIDS and partners, and supported by the UK.

Multilateral Modernisation: The AOSIS Leaders’ Declaration 2021 reiterates the importance of an effective multilateral system based on international law, supported by strong international institutions. It also calls upon International Financial Institutions (IFIs) to review SIDS access to concessional finance for sustainable development.

At a UK-organised roundtable in 2020, Fiji argued that the international community cannot keep kicking difficult SIDS questions requiring reform down the road. That discussion was dominated by calls for reform in three areas (eligibility, onerous bureaucracies, and debt) and these were further addressed at the High-Level Roundtable meeting in 2021, leading to the joint UK, AOSIS, Fiji and Belize Call to Action. The reform areas identified by SIDS in these discussions contribute to the broader reform agenda that has been spurred by wider proposals, including through the Bridgetown Initiative launched by Barbados Prime Minister Mottley in 2022.

 

 

 

 

  1. B) What resources will the UK Government need to commit to implementing its SIDS Strategy?

 

Internal Resource

The UK has committed resources to achieving action for sustainable development in SIDS and the UK SIDS Strategy brings together existing and new initiatives for a coherent approach. The UK commitment to deliver the Strategy is demonstrated by the appointment of a Special Envoy for SIDS in April 2022 and establishment of a cross-Government UK SIDS Strategy working group. The Special Envoy for SIDS ensures that the UK is represented internationally at senior official level with a specific mandate to advocate for action on SIDS issues. The cross government working group will meet twice annually to share updates and ensure coherence and identify opportunities for synergies across departments. FCDO has established a SIDS Unit to support this work, bringing together policy and programme expertise.

 

Partnerships

The UK SIDS Strategy, the UK International Development Strategy, and SIDS-owned strategies each recognise that the UK cannot solve these issues alone and there is a need to leverage the wider international system for collective action and resources to achieve sustainable development in SIDS. The UK has worked with others to pursue this goal through the SIDS Access to Finance Roundtable process; the UK-supported Wadadli Action Platform; and a UK co-chaired SIDS taskforce at the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD-DAC), established in 2023. AOSIS have partnered with the UK in these initiatives to leverage the wider international system to achieve reform for SIDS across the objectives in the SAMOA Pathway, and the UK will support efforts for a successful outcome of the 4th International Conference on SIDS in 2024.

 

While access to finance is a key focus of the UK advocacy offer, other areas where the UK is active include:

 

Programmes

The UK allocates approximately £200m of aid annually to SIDS. This includes a £76m portfolio of centrally managed programmes specifically designed to achieve improved access to finance and improved capacity in SIDS. The Small Island Developing State Capacity and Resilience (SIDAR) programme builds capacity to access funding and technical solutions at scale, and the Sustainable Blue Economies (SBE) programme supports SIDS to close the capacity gap in managing their vast ocean territories for climate and economic resilience. The UK also has programme resources committed towards achieving outcomes under the thematic priorities in the UK SIDS Strategy.

 

Climate Change and natural disasters: The UK supports SIDS through our existing UK International Climate Finance commitments and portfolio. Sections 5 and 6 explore UK support for climate action in SIDS in more detail, including the Climate Ambition Support Alliance, the Green Grids Initiative, the Green Climate Fund, and the Taskforce on Access to Climate Finance.

Ocean and Biodiversity: In 2021, the UK launched the £500m Blue Planet Fund, which supports developing countries to protect the marine environment and reduce poverty; SIDS are a priority for Blue Planet Fund programming, which includes the £36m Sustainable Blue Economies programme (SBE), a SIDS-specific offer recognising that SIDS steward a third of the global ocean and the significant biodiversity in these areas, but face ocean management capacity issues compared to larger coastal countries. The Blue Planet Fund also includes support to SIDS under the Global Biodiversity Framework “30by30” initiative to protect at least 30% of the global ocean by 2030, the Commonwealth Blue Charter’s Commonwealth Clean Ocean Alliance (CoCOA), technical assistance and capacity building through the Ocean Country Partnership programme (OCPP) and support for coral reef health through the Global Fund for Coral Reefs (GFCR).

Economic Diversification and Prosperity: The UK is committed to supporting economic resilience and sustainable development in SIDS through our trading relationships, trade-related assistance, and investment. The UK Department for Business and Trade has staff present in SIDS regions and priorities include addressing market access barriers to support further trade liberalisation. The UK offers duty-free market access for goods for 20 SIDS through our Economic Partnership Agreements. A further twelve SIDS are eligible for preferential access under the UK’s Developing Countries Trading Scheme, which will come into effect on 19 June 2023. The UK’s trade-related ODA funding supports SIDS in a variety of ways. Under the UK Trade Partnerships Programme, our export promotion and market intelligence projects have supported SIDS to diversify exports, increase trade with the UK/EU, and create jobs. The Trade and Investment Advocacy Fund facilitates SIDS’ participation in multilateral trade negotiations, for example the UK supported the Pacific Islands Forum Secretariat to build capability to negotiate at the WTO, which contributed to a successful outcome on fisheries at the 12th WTO Ministerial Conference.

British International Investment (BII), the UK’s development finance institution and impact investor, announced in October 2022 that it will be re-entering the Caribbean after 20 years. British International Investment will invest up to £7.5 billion from 2022-26 to help create productive, sustainable, and inclusive economies across its markets, including the Caribbean. British International Investment will look to provide climate finance to help boost resilience and adaptation and deploy capital in sectors including renewable energy and financial services. In November 2022, British International Investment announced a $10 million commitment to Small Enterprise Assistance Funds (SEAF) to back high-growth small to medium enterprises (SMEs) and bolster businesses’ ability to scale-up operations.

Debt: The UK announced at COP27 that UK Export Finance will be the first export credit agency to offer Climate Resilient Debt Clauses (CRDCs) in its direct sovereign lending to SIDS and Least Developed Countries. This allows SIDS to pause debt repayments when a climate shock or natural disaster hits. The UK encourages other creditors to adopt Climate Resilient Debt Clauses in their lending agreements. The UK supported the Debt Service Suspension Initiative (DSSI). The UK also supports the G20 Common Framework for Debt Treatments Beyond the DSSI, for which 22 SIDS are eligible. The UK is a leading donor to the IMF’s Catastrophe Containment and Relief Trust.

Inclusive Governance and shared values: In March this year the FCDO released its first Women and Girls Strategy, in it we have re-committed to support the 3 Es: education, empowering women and girls, and ending violence, including through a major new campaign. There has also been work carried out to review the UK’s strategic approach to LGBT+ rights and develop regional approaches. Through our Work and Opportunities for Women Programme, we have supported research into women’s economic empowerment in Blue Economy sectors in SIDS that will improve targeting of the Blue Planet Fund. Proposed approaches include programmatic support, post-led advocacy, and working bi-laterally with other development partners such as Australia and New Zealand in the Pacific region.

Multilateral Modernisation: To support the UK’s advocacy offer, the Small Island Developing State Capacity and Resilience programme provides finance to build capacity in SIDS to engage with multilateral bodies, particularly on finance issues. An evidence and lesson learning component of this programme has also supported initiatives such as a new Resilient and Sustainable Islands Initiative (RESI) report on allocations of finance for resilience by international actors. Other initiatives such as the Taskforce on Access to Climate Finance are similarly drawing on evidence to profile the need for reform.

The FCDO SIDS unit works closely with our missions and delegations in international institutions. The UK provides the policy expertise and human resource necessary to support a number of international initiatives. For example, the UK has co-chaired the SIDS Working Group within the OECD-DAC and now co-chairs the DAC-SIDS Taskforce.

The Access to Finance Roundtable process leading to the Call to Action received administrative and policy support from FCDO, in addition to the UK Co-Chairing the process. The Call to Action recommendations are now the focus for a new international `Friends of SIDS’ coalition for which the UK acts as secretariat. In addition, UK expertise is helping the secure international dialogue on reform of international finance, including climate finance.

  1. How can the UK best assist SIDS in the work of building resilience to the impacts of climate change and natural disasters? How effective are existing UK ODA-funded projects in SIDS?

 

Building resilience to the impacts of climate change, economic shocks and natural disasters is at the heart of the UK vision for SIDS and the UK SIDS Strategy. The UK’s ambitious climate agenda is outlined as the first thematic priority of the Integrated Review Refresh, committing to support `the most vulnerable to adapt and build resilience to the effects of climate change, and protecting biodiversity as agreed through the Kunming-Montreal Global Biodiversity Framework.’ Our £11.6bn commitment for climate finance and our role as a major contributor to global climate funds has enabled the UK to work for the prioritisation of SIDS, Least Developed Countries and other vulnerable states.

 

Policy: The UK also recognises the combined impact of climate, economic and capacity issues, and the UK response includes both policy and programming. The UK works to support SIDS advocacy, providing platforms for their voices, as well as supporting their climate action through targeted programmatic support. For example, the UK COP26 Presidency prioritised providing additional support to SIDS, enabling almost all SIDS to be represented by a delegation at COP26, including 20 at leader-level. PM Mottley of Barbados and Youth Leader Brianna Fruean from Samoa spoke at the opening ceremony. SIDS were influential in landing a successful outcome at the Summit. The UK is committed to delivering the promises of the Glasgow Climate Pact, including action on finance and addressing loss and damage.

 

The UK recognises that delivering the Glasgow Climate Pact will take a concerted policy effort across the international community, with bilateral development partners, and multilateral institutions taking action. At a reception for SIDS leaders to mark the Coronation of His Majesty the King, the Foreign Secretary stated that:

 

An international system that is fit for purpose for SIDS is one that is country -focused - with rules and processes suited to small states and to the unique situation of our SIDS partners; pragmatic – adapting to realities on the ground, and not stuck in outmoded models; and one which is committed and fully focused on delivering tangible change.

 

The Foreign Secretary noted that reform of international finance is a good starting point. Sections 6 and 7 set out some of the partnerships and steps taken by the UK to ensure that the international system is fit for purpose for SIDS. These steps address issues of climate and disaster financing, sustainable economies, and low capacity. The UK recognises progress in key areas including new coalitions focused on change and some steps to address specific problems, such as agreement to establish new funding arrangements to address Loss and Damage. At COP27 it was agreed that a fund will be developed through a Transitional Committee, established under the United Nations Framework Convention on Climate Change. The UK is one of the 24 members of the Transitional Committee and has actively engaged with its work, including attending the first formal meeting in Egypt in March 2023.

 

Programmes: The UK’s portfolio of ODA-funded projects in SIDS includes multilateral and multi-donor programmes and bilateral spend. Some spend is delivered through multilateral organisations, whose footprint in SIDS or delivery modalities can help to offset the diseconomies of scale of development in these contexts. Delivery challenges in SIDS are also a factor of their structural vulnerabilities, an Asian Development Bank 2019 evaluation pointed to capacity as a constraint on disbursements and implementation of programmes.[7] The inability of SIDS to convert available resources into successful climate resilience programmes can reflect gaps in technical systems (e.g. procurement) with a K4D evidence review pointing to a failure to cater to the individual problems of these states by donor countries[8], problems which prompted the initiative to develop new guidance on impact (see Section 6 below).

 

In the Pacific, the UK’s approach is based on principles of long-term engagement and partnership with countries and their regional institutions. The UK focuses in those areas where it has expertise, which complements the work of other partners, and can use the UK’s influence to support Pacific Island Country priorities. Targeted UK funding supports the Pacific to tackle climate change, protect the ocean, respond to disasters, increase economic growth, and support open societies and free media.

In the Caribbean, the UK is the lead bilateral donor to the English-speaking ODA-eligible Commonwealth countries. The UK’s support helps to build climate and economic resilience through a £430m bilateral aid portfolio, including approximately £350m in international climate finance, as well as working through multilateral organisations. The UK’s bilateral programmes in the Caribbean include the UK Caribbean Infrastructure Fund which finances climate resilient infrastructure (roads, ports, water supply and irrigation) as well as programmes strengthening inclusive economic development, public financial management, supporting a renewable energy transition and combatting violence, serious and organised crime, and corruption. The UK recently delivered a Smart Hospitals Programme which developed a blueprint for climate resilient health centres and retrofitted over 50 health centres across the region. The UK has in place an arrangement with the Caribbean Disaster Emergency Management Agency for deployment of emergency teams in response to natural disasters. 

The UK’s regional bilateral spend is complemented by centrally managed SIDS programmes which support SIDS to leverage other finance (see SIDAR and SBE above). These centrally managed programmes focus on gaps in the broader landscape of support by engaging with SIDS on capacity issues that constrain key areas of resilience.

In addition, the UK delivers through multilateral climate initiatives. The UK is currently the largest contributor to the Green Climate Fund (£1.44bn for 2020-23), which is helping reduce emissions and build climate resilience in over 125 developing countries. To date, the Green Climate Fund has approved 54 projects in SIDS for a total of $1.4bn of funding (over 10% of its total portfolio). The UK has been influential in establishing targets for adaptation for the most vulnerable countries within the fund, as well as pushing for its increased effectiveness through improved accessibility of funding for the most vulnerable countries. The Green Climate Fund undertook an independent evaluation of its SIDS portfolio, which reported in 2020, and the UK’s approach is informed by this work and feedback from SIDS partners.

The UK announced £13m in new funding at COP27 to support vulnerable countries to adapt to climate impacts. The UK also supports global programmes that address the needs of SIDS, including:

 

 


  1. What development activities are the UK’s partner states, such as the USA, Australia, New Zealand, Japan, the Republic of Korea, and Canada, undertaking in support of SIDS? How can the UK Government best use its resources to complement those activities and to avoid duplication?

 

The UK’s partners, including the USA, Australia, New Zealand, Japan, the Republic of Korea, and Canada, are all engaged in tackling the unique development needs of SIDS. They engage to varying degrees across the regions and a wide range of sectors, including climate adaptation and infrastructure. For example, Australia, New Zealand, and Japan are major partners to Pacific SIDS, and Canada has a significant development presence in the Caribbean. Effective development in the capacity-constrained and remote SIDS requires close coordination between development partners. International reform on SIDS issues also requires close coordination given progress often requires consensus. The UK works closely with partners and prioritises building coalitions to encourage change and improve coordination. Internationally, ministers and senior officials regularly discuss with counterparts the need for coordinated action on SIDS unique issues. For example, the recent UK-France summit committed: to expand cooperation on issues affecting small island developing states such as access to finance and economic resilience, including in the Indo-Pacific where vulnerable Pacific Islands face critical challenges.

 

Policy partnerships

The UK works closely with development partners, SIDS and international bodies on the policy issues that matter most to SIDS. The UK has worked with AOSIS and the UN on initiatives to raise awareness of the 2024 4th International Conference on SIDS and meet both groups regularly. Recently the UK has partnered and engaged with both through SIDS discussions at Wilton Park, a UK supported conference organised by ODI, and a SIDS reception to mark the coronation of His Majesty the King.

 

Examples of initiatives include:

 

Programme partnerships

The UK recognises that some development partners, such as Australia, are larger donors to SIDS and that coordination assists the effective targeting of UK aid. At country level, and regionally, the UK engages with development partners through dialogue, and shared engagement with bodies such as CARICOM and the Pacific Island Forum to improve coordination.

 

We participate in development partner co-ordinating bodies where they exist for programme countries/regions, such as the Eastern Caribbean Development Partners Group (ECDPG). We have also worked to encourage greater co-ordination, including funding a new climate finance co-ordinating function in Fiji. And we have promoted co-ordination through the UK co-chaired process to develop new principles to improve development impact in SIDS. The principles process included a focus on the need to improve harmonisation of support. The UK recognises that donor and SIDS co-ordination is most challenging for the Atlantic, Indian Ocean and South China Sea (AIS) group of SIDS and have plans to recruit a staff person to support this group on development co-ordination.

 

Examples of programme partnerships include:

 


  1. Whether multilateral bodies such as the World Bank require reform to meet SIDS’s development needs. If multilateral bodies do require reform, what might such reform entail and how might the UK Government facilitate it?

 

SIDS are a special case for sustainable development, with a combination of economic and climatic vulnerabilities. Narrow economies, low capacity, high disaster risk, and poor credit ratings limit SIDS’ access to commercial finance. These unique circumstances are recognised to differing degrees across the multilateral system and informs the UK’s intention that greening and reforming the international financial system will secure improvements for the most vulnerable states. The UK approach is to secure reforms that contribute to strengthening economic and climate resilience. This requires a focus both on the adequacy of volumes and timeframes of funding and also on quality and impact, ensuring that provider systems are tailored to low-capacity states.

The UK has been seeking reforms within the multilateral climate funds, international financial institutions (IFIs) and among bilateral donors. A key issue for SIDS is implementation of the Glasgow Climate Pact principle that vulnerability should be considered in decisions on finance. Many SIDS favour the use of multidimensional vulnerability indices (MVIs), alongside GNI per capita for financing decisions and a UN High Level Panel on MVIs will present its findings in 2023. Other approaches have also been used to assess SIDS vulnerability, such as the World Bank’s Small Island Exception (SIE). SIDS receive only 3.1% of ODA (according to OECD for 2021) and are dealt with by the UN in conjunction with Least Developed Countries (who receive 30.2%) as two blocks in special situations for Agenda 2030.[9]

SIDS also seek better focused, better quality and sustained support from bilateral donors and international institutions. At a High-Level Political Dialogue at the World Bank Annual meetings in October 2022, AOSIS and OECD-DAC members agreed to establish a Taskforce to develop a new partnership to drive a joint agenda of action ahead of the UN 4th International Conference on SIDS in 2024. The UK is co-chairing this taskforce, the other co-chair is a shared seat between AOSIS and the SIDS 4th International Conference hosts, Antigua and Barbuda.

The OECD-DAC SIDS Taskforce will consider a range of issues including priorities for joint action between development partners and SIDS. It may also consider the processes of the OECD-DAC itself, such as improving the operation of the graduation process. While the UK abides by the rules of the OECD-DAC on ODA, the UK recognises that the criterion used for eligibility (GNI per capita) does not adequately capture the development position of small states. The current graduation system works poorly for SIDS, as shown over the last three years by the case of Palau. The UK is working on the need for improvements to the current ODA graduation system and believes that this should align with the Glasgow Climate Pact principle of vulnerability guiding decisions on finance.

The World Bank, the Regional Development Banks, and the International Monetary Fund have an important role in provision of finance and shaping development policy in the world’s poorest and most vulnerable countries, including SIDS. The IFIs are significant financiers of SIDS. They provided over 25% of overall Official Development Finance to SIDS over 2020-2021. IFIs have taken steps to improve their support to SIDS in terms of both scale of finance and operationally tailoring support to SIDS. Nonetheless, strengthening the quality of IFI support to SIDS is desirable, both through broader IFI reforms that will benefit SIDS and also SIDS-specific priorities. The UK’s push for reform overlaps with, and complements, several other IFI reform efforts, including the “Bridgetown Initiative”, which is led by a SIDS leader (Barbados PM Mottley), and the World Bank Evolution Roadmap.

The UK is promoting the following key reforms to the IFIs (including, but not limited to, the World Bank):

At the IFIs the UK has pressed the campaign for IFI reform – with ministerial led public and private events at the World Bank Spring Meetings to progress this agenda; discussing IFI reform as a top priority with counterparts. The UK continues to pursue IFI reforms and initiatives to deliver for SIDS through the Boards of the Institutions, and in bilateral and multilateral engagements.

 

 

 

 

 

 

 

 

 

 

 

 

 


Annex A: List of Acronyms

 

Acronym                                                        Definition

 

AIS                                                                      Atlantic, Indian Ocean and South China Sea

AOSIS                                                        Alliance of Small Island States

BII                                                                      British International Investment

BPF                                                                      Blue Planet Fund

CARICOM                                                        Caribbean Community

CASA                                                                      Climate Ambition Support Alliance programme

CCOA                                                                      Commonwealth Clean Ocean Alliance

CDEMA                                          Caribbean Disaster Emergency Management                                           Agency

CHOGM                                                        Commonwealth Heads of Government Meeting

CRDCs                                                        Climate Resilient Debt Clauses

DBT                                                                      UK Department for Business and Trade

DCTS                                                                      UK’s Developing Countries Trading Scheme

DFAT                                                        Australia’s Department of Foreign Affairs and                                                         Trade

DSSI                                                                      Debt Service Suspension Initiative

EPA                                                                      Economic Partnerships Agreement

GCF                                                                      Green Climate Fund

GDP                                                                      Gross Domestic Product

GFCR                                                                      Global Fund for Coral Reefs programme

GGI                                                                      Green Grids Initiative

GNI                                                                      Gross National Income

GPEDC              Global Partnership for Effective Development Co-operation

ICF                                                                      International Climate Finance

IDA                                                                      International Development Assistance

IFIs                                                                      International Financial Institutions

IFRC-DREF              International Federation of Red Cross and Red Crescent Societies’ Disaster Relief Emergency Fund

IMF                                                                      International Monetary Fund

IR & IRR                                                        Integrated Review and Integrated Review Refresh

IRIS                            Infrastructure for Resilient Islands States               programme

LATAC                                                        Latin America and Caribbean

LDCs                                                                      Least Developed Country(ies)

MVI                                                                      Multidimensional Vulnerability Indices

NDC                                                                      Nationally Determined Contributions Partnership

OCPP                                                                      Ocean Country Partnership Programme

ODA                                                                      Official Development Assistance

ODI                                                                      (Overseas Development Institute)

OECD-DAC              Organisation for Economic Co-operation and Development’s Development Assistance Committee

PBP                                                                      Partners in the Blue Pacific

PCRIC                                                        Pacific Catastrophe Risk Insurance Company

PICs                                                                      Pacific Island Countries

PIF                                                                      Pacific Islands Forum

RESI                                                                      Resilient and Sustainable Islands Initiative

SAMOA Pathway              Small Island Developing States Accelerated Modalities of Action

SBE              Sustainable Blue Economies programme

SDGs                                                                      Sustainable Development Goals

SIDAR              Small Island Developing State Capacity and Resilience programme

SIDS                                                                      Small Island Developing States

SIE                                                                      World Bank’s Small Island Exception

SMEs                                                                      Small and Medium Enterprises

TAF2+                                                        The Trade and Investment Advocacy Fund

UKCIF                                                        UK Caribbean Infrastructure Fund 

UMIC                                                                      Upper Middle-Income Country(ies)

UNFCCC              United Nations Framework Convention on Climate Change

WBG                                                                      World Bank Group

WTO                                                                      World Trade Organization

 

 OFFICIAL

[1] recognized in 1992 at the UN Conference on Environment and Development and reaffirmed at UN International SIDS Conferences, most recently at the 2019 Mid-Term Review of the SAMOA Pathway.

[2] For diseconomies of scale see: https://www.imf.org/external/pubs/ft/fandd/2013/09/jahan.htm

[3] For which data was available

[4] the threshold is currently Gross National Income (GNI), per capita of $12,695 measured by the Atlas method

[5] SAMOA Pathway Preamble: ‘5. we reaffirm that small island developing States remain a special case for sustainable development in view of their unique and particular vulnerabilities and that they remain constrained in meeting their goals in all three dimensions of sustainable development. We recognize the ownership and leadership of small island developing States in overcoming some of these challenges, but stress that in the absence of international cooperation, success will remain difficult’

[6] AOSIS Leaders’ Declaration 2021: ’19. support the policy actions and programmes outlined therein to ensure the full implementation of the critical development areas highlighted in the SAMOA Pathway, placing specific and urgent emphasis on, inter alia, poverty eradication, disaster risk reduction, biodiversity and oceans and seas, debt reduction and sustainable economic growth, empowerment of women and girls, youth development, education and healthcare sectors’

[7] ADB, Relevance and Results of Concessional Finance: Asian Development Fund XI and 12, 2019

[8] How losing access to concessional finance affects Small Island Developing States (SIDS) Evert-jan Quak Institute of Development Studies 16 July 2019

[9]https://sdgs.un.org/sites/default/files/publications/21252030%20Agenda%20for%20Sustainable%20Development%20web.pdf