Small island developing states

There is no widely accepted definition of a Small Island Developing States (SIDS) and the reported salient characteristics of small states tend to vary between academic disciplines. Armstrong and Read (1998) outline the concept of small developing states as states where population size impacts negatively on the domestic market, the pattern of sectorial specialisation, comparative advantage, trade policy, and macroeconomic policy. More recently, Seetanah (2011) characterise these salient features of SIDS as vulnerabilities, in comparison with other developing countries, where vulnerability relates to problems arising from the interplay of special economic and institutional characteristics of SIDS due to “their smallness, remoteness, geographical dispersion, vulnerability to natural disasters, fragility of their ecosystems, constraints on transport and communication, isolation from markets, vulnerability to exogenous economic and financial shocks, small domestic market, lack of natural resources, limited fresh water supply, dependence on imports” (p.292-293). Furthermore, for Small Island Developing States (SIDS), with islandness (or for archipelagic SIDS, where the islands are remote and secluded), Armstrong and Read (2003) suggest that these negative factors are further compounded by transport costs, communication problems, and isolation. The islandness requires delivery of goods by sea or air transport. Poor internal communication in these highly fragmented islands causes difficulties and external links also incur high costs. Geographical dispersion of islands further fragments the domestic market, reinforcing the effects of small-scale economies. Such implications are also attributed to the word “vulnerability” beyond the disaster discourse (Lewis, 1999, p.93).

Although the term “vulnerability” is usually attributed to disasters such as disease, tsunamis and climate change, the term also includes limitations in socio-economic opportunities due to factors such as geographical isolation (Hussain, 2008).

38 There is great optimism that ICT diffusion can alleviate the vulnerabilities faced by SIDS. According to the Commonwealth secretariat “for many SIDS (Small Island Developing States) remoteness, smallness and isolation can be overcome and the development of modern communications capacities could become the engine of growth, development, and diversification.” (Commonwealth Secretariat, 1997, p.8). It is believed that e-commerce offers the potential to eliminate geographical barriers for many remote and isolated states, allowing them to do business by reducing their distance from key markets and growth poles (Read & Soopramanien, 2004). More generally, the common perception that the ICT revolution would make geographical space unimportant has flourished over the past few decades. In 1995, Nicholas Negroponte (1995) wrote in his book Being Digital that the digital revolution will remove the limitations of geography. Recently, Thomas Friedman (2006) in his book The World is Flat argued that distance no longer matters, and that ICT allows more freedom of location. In a similar vein, Frances Cairncross (2001) predicting the future of technology usage in her often-cited book The Death of Distance, claims any action relying on a computer screen or a telephone can be performed from anywhere in the world irrespective of geographical boundaries. But she notes, “the death of distance loosens the grip of geography. It does not destroy it” (p.5).

In spite of such insightful predictions and the growing acceptance of role of ICT in development agendas, there is a paucity of academic research investigating the factors affecting IT usage in these developing states. Among the few studies, a paper delivered to the “Islands of the World VII International Conference”, Armstrong and Read’s (2004), analysis of the economic performance of small states and islands (based on economic performance (in terms of indicators such as GNP per capita and unemployment rates and in terms of their growth rates)), shows that the small size of the domestic market results in lack of economies of scale and competitiveness. At the same conference, Read and Soopramanien (2004) proposed a model in which the principle constraints in assimilation and effective utilisation of e-commerce are identified as (a) difficulties in creating a critical mass of domestic physical and technological infrastructure (i.e. not enough people to buy goods and services), (b) low levels of income, and (c) lack of human capital. They note that the first constraint is related to the limited investment capacity while the other two limit the ability of individuals, firms, and institutions to use ICT effectively. Thus, the adoption of e-commerce is constrained

39 for both supply and demand side reasons (Read & Soopramanien, 2004). The supply side fails to achieve critical mass of domestic economic activities such as investment in infrastructure, since domestic demand is insufficient for efficient output. The demand side is constrained by the magnitude of the domestic market for services, and for retailing and wholesaling. This constraint requires domestic firms to find ways of accessing global trade networks in order to reap the benefits of large-scale production (Read & Soopramanien, 2004). Thus, openness to trade is necessary for small developing states (Armstrong & Read, 2003, 2004; Read & Soopramanien, 2004).

Additionally, alongside the large investment in infrastructure, small developing states experience a critical need for investment in human capital to overcome labour constraints (as discussed in section 2.2.5 Human capital). Therefore, these countries experience a double barrier to the adoption of e-commerce (Read & Soopramanien, 2004). Mohammed (2004), analysing the official national websites for small developing countries for content and function note that the challenges faced by small developing states include limitations in finance and resources, which affects their economic survival and competition in the international market. Size and development are two major factors that affect the accessibility and use of new ICT in small developing states. Molla and Taylor (2006) also had similar findings in their research in Barbados, and more recently Wresch and Fraser (2011), examining the barriers to e-commerce in the Caribbean region also affirm the salient characteristics of SIDS. They show that competition in the international market, limitations in expertise, legislation, and a number of services such as software, e-payment, and delivery hinder e-commerce use due to telecommunication and traffic (safe traffic routes) infrastructure. Furthermore they note that in addition to the vulnerabilities of being a SIDS, the geographical proximity to the United States has major influences on ICT usage. Additionally, location is a very important issue that remains influential in small states in relation to the economic growth of SIDS (Armstrong & Read, 2001; Biagini & Hoyle, 1999; Campling, 2006; Read, 2001).

Biagini and Hoyle (1999) go on to argue that for some islands it might be claimed

“location is everything” (p.360). This suggests that the regional position of SIDS may affect ICT usage.

Given these particularities, most of which are structural (beyond the control of the country) in nature, SIDS face a myriad of issues when using ICT and e-business.

Although a strong emphasis is put on using ICT and e-business as tools to build

40 resilience in SIDS there is a dearth of literature investigating how ICT and e-business are used in SIDS. Specifically, little is known about the ICT usage in various sector organizations of SIDS in the Asia-Pacific region, especially the Maldives. A study done by the ITU (Minges & Gray, 2004), briefly outlines the situation in the Maldives to note the lack of information regarding use of ICT in the business sector. In order for it to be a practical tactical and strategic tool, a comprehensive investigation of how ICT and e-business is used in the context of the country should be undertaken. A study based on the Maldives context, identifying the factors affecting ICT and e-business usage and an understanding on the deeper underlying forces would be a significant contribution to academic literature as well as a guide to strategic action for SIDS.