United Nations

A/53/65


General Assembly

Distr. GENERAL  

6 February 1998

ORIGINAL:



                                                 A/53/65 -- E/1998/5
                                                 
                                                 Original: English

General Assembly                                 Economic and Social Council
Fifty-third session                              Substantive session of 1998
Environment and sustainable development:         6-30 July 1998
implementation of the outcome of the Global      Item 13 (a) of the
Conference on the Sustainable Development          provisional agenda*
of Small Island Developing States                Economic and environmental
                                                   questions:  sustainable
                                                   development

                                                 * To be issued as E/1998/100.
 

         Development of a vulnerability index for small island
                           developing States


                    Report of the Secretary-General


1.   Paragraphs 113 and 114 of the Programme of Action
for the Sustainable Development of Small Island
Developing States (A/CONF.167/9), which was endorsed
by the General Assembly in 1994 in its resolution 49/122
of 19 December 1994, call for the development of a
vulnerability index (indices) for small island developing
States (SIDS). Those paragraphs read as follows:

               "Small island developing States, in cooperation
          with national, regional and international organizations
          and research centres, should continue work on the
          development of vulnerability indices and other
          indicators that reflect the status of small island
          developing States and integrate ecological fragility
          and economic vulnerability. Consideration should be
          given to how such an index, as well as relevant studies
          undertaken on small island developing States by other
          international institutions, might be used in addition
          to other statistical measures as quantitative indicators
          of fragility.

               "Appropriate expertise should continue to be
          utilized in the development, compilation and updating
          of the vulnerability index. Such expertise could
          include scholars and representatives of international
          organizations that have at their disposal the data
          required to compile the vulnerability index. Relevant
          international organizations are invited to contribute
          to the development of the index. In addition, it is
          recommended that the work currently under way in the
          United Nations system on the elaboration of
          sustainable development indicators should take into
          account proposals on the vulnerability index."

2.   By its resolution 50/116 of 20 December 1995, the
General Assembly renewed its request that work begin on
the index. In 1996, at its fourth session, the Commission on
Sustainable Development, in decision 4/16, encouraged "the
relevant bodies of the United Nations system to accord
priority to the development of the index".

3.   Accordingly, the Department of Economic and Social
Affairs undertook initial studies in 1996, in order to provide
a conceptual framework for the development of a
vulnerability index. A background paper was prepared and
distributed in December 1996 to small island developing
States, organizations of the United Nations system and
academic and research institutes for comments. The paper
provided an analysis of the inherent vulnerabilities of small
island developing States, discussed a possible approach to
the vulnerability issue and suggested that consideration be
given to the construction of an economic vulnerability index
and an ecological vulnerability index, each composed of a
number of appropriate indicators. The more than 20
responses received were all supportive of the main thrust
of the background paper. The background paper was
subsequently revised. 1/

4.   In 1997, the Department of Economic and Social
Affairs engaged two consultants, 2/  one to develop an
economic vulnerability index and the other to develop an
ecological vulnerability index. The Department also
convened an ad hoc expert group to review the technical
work of the consultants and to make appropriate
recommendations. The report of the expert group is
contained in the annex to the present report.

5.   Subsequently, Working Group III of the Committee
for Development Planning met from 17 to 19 December
1997. In accordance with the work programme adopted by
the Committee at its thirty-first session, 3/  and the draft
General Assembly resolution contained in document
A/C.2/52/L.41, the Working Group reviewed the work of
the ad hoc expert group on the development of a
vulnerability index for small island developing States and
considered the usefulness of the vulnerability index as a
criterion for the designation of the least developed
countries. It agreed to meet again shortly before the
Committee's scheduled thirty-second session (4-8 May
1998) to continue their work and requested the secretariat
to undertake additional statistical work to support their
efforts.


                                   Notes


          1    "Vulnerability Index: Revised Background Paper", prepared
               by the United Nations Department of Economic and Social
               Affairs, June 1997.

          2    Professors Lino Briguglio and Dennis Pantin.

          3    Official Records of the Economic and Social Council, 1997,
               Supplement No. 15 (E/1997/35).


                                    Annex

         Report of the ad hoc expert group meeting on vulnerability
                indices for small island developing States


Contents         

                                                        Paragraphs  Page

  I.  Introduction . . . . . . . . . . . . . . . . . .      1         4

 II.  Highlights of major reports reviewed . . . . . .     2-13       4

      A.  Alternative economic vulnerability indices .     2-4        4

      B.  Measurement of the vulnerability of small States  5         4

      C.  Composite vulnerability index: a revised report  6-8        4

      D.  Alternative ecological vulnerability indices     9-11       5

      E.  Vulnerability of small island developing 
          States in the context of globalization . . .    12-13       5

III.  Conclusions and recommendations. . . . . . . . .    14-25       5

 IV.  Organization of the meeting. . . . . . . . . . .    26-29       7

Appendix - List of participants/observers. . . . . . . . . . . . . .  8


        I.     Introduction


1.   The expert group reviewed a number of studies on the
vulnerability issue, including studies specifically prepared
for the meeting and studies prepared for other meetings.
Brief summaries of the major reports, as agreed by the
expert group, are given in section II of the present report
and its conclusions and recommendations are contained in
section III.


       II.     Highlights of major reports reviewed


        A.     Alternative economic vulnerability indices


2.   The study by L. Briguglio a/ examined the conceptual
relevance and effectiveness of a number of indicators in
capturing long-term economic vulnerability of countries.
Those indicators were:

               (a)     Economic exposure index based on trade
openness: exports plus imports of goods and services as a
percentage of gross domestic product (GDP);

               (b)     Export concentration index: percentage of three 
highest export categories in total exports of goods and
services, or export diversification index of the United
Nations Conference on Trade and Development
(UNCTAD);

               (c)     Peripherality: percentage of freight and
insurance debits relative to total merchandise imports, or
the cost, insurance, freight/free on board (c.i.f./f.o.b.) factor
expressed as a percentage; 

               (d)     Dependence on imported commercial energy:
imports of commercial energy expressed as a percentage of
imports plus production of commercial energy, or imports
of fuel as a percentage to gross national product (GNP); 

               (e)     Dependence on foreign sources of finance:
remittances, capital and financial inflows as a percentage
of GNP, or total external debt as a percentage of GNP. 

3.   The selection of those indicators was based on the
general observation that the higher their value in a given
country, the higher the susceptibility of the country to
external shocks. All the indicators were individually
assessed for their respective suitability in terms of their
effectiveness in capturing the underlying causes of 
long-term vulnerability.

4.   A total of 19 composite indices combining different
sets of the indicators were reviewed. The exercise was done
for a maximum of 111 countries, including 30 small island
developing States. The results generally indicated that small
islands were among the most vulnerable developing
countries.


      B.  Measurement of the vulnerability of small States


5.   The study by R. Chander b/ used the basic methodology
employed by L. Briguglio, but an alternative set of
variables. The following four basic variables were used in
the computation of a composite vulnerability index:

               (a)     The ratio of exports of goods and services to
GDP, to capture the dependence on external markets;

               (b)     Export concentration, to highlight dependence
on a narrow range of products;

               (c)     The ratio of long-term capital flows to gross
domestic investment to reflect dependence on external funds
to finance development;

               (d)     The ratio of imports at c.i.f. and f.o.b. values,
as a measure of costs associated with remoteness and
insularity.

The variables were standardized and equal weights assigned
to them in the computation of the composite vulnerability
index, which confirmed that small island developing States
were generally more vulnerable than larger countries. The
study also confirmed that countries which had a diversified
export and production base were less vulnerable, and
emphasized that further refinements of a composite
vulnerability index would need to await data refinements
and improvements.


      C.  Composite vulnerability index: a revised report


6.   The main objective of the Commonwealth
Secretariat's work on vulnerability indices for small States
is to demonstrate that these countries are more vulnerable
than large countries because of the instability of their
income, despite relatively high per capita incomes. 

7.   The empirical analysis done by the Secretariat c/
suggested that, although the trend growth rates of small
economies were not different from large States, they were
more vulnerable to external shocks. The heightened
vulnerability was manifest in a higher volatility of output
of small States compared with large countries. Therefore,
volatility of output was used as the underlying principle in
the construction of the composite vulnerability index.

8.   The factors contributing to output volatility were
identified using multiple regression analysis. This analysis
suggested three important reasons for greater volatility of
small States' GDP, namely, instability of purchasing power
of exports in terms of imports (i.e. net income terms of
trade); instability of capital inflows relative to GDP; and
vulnerability to natural disasters. Three vital elements which
capture these influences were selected on the basis of
correlation analysis for inclusion in the composite index,
namely, export diversification, capital openness, and
vulnerability to natural disasters estimated as the percentage
of population affected by natural disasters. These three
variables, together with per capita GDP, constituted the
components of the composite index. By and large, the index
values suggested that small States are more vulnerable than
large countries.


     D.  Alternative ecological vulnerability indices


9.   In the study by D. Pantin, d/ ecological vulnerability
indices are meant to capture the relative susceptibility of
economies to damage caused by natural disasters and the
relative susceptibility of the ecology of countries to damage
by anthropogenic activities. A comprehensive assessment
of ecological vulnerability either in terms of countries or
indicators, was not possible owing to constraints posed by
insufficient data.

10.  On the basis of the available data, the expert group
examined the impact of natural disasters on a number of
economic indicators, such as exports, imports, consumer
price indices and external debt. The exercise was done for
two sets of developing countries. One set comprised 83
countries, including 27 small island developing States, and
the other comprised 58 countries, including 18 small island
developing States. The countries were grouped into three
categories: small island developing States, other islands and
non-islands. The exercise revealed that small island
developing States as a group are the most seriously affected
in relation to the indicators used.

11.  The expert group also examined the impact of natural
disasters on the population and susceptibility to ecological
damage in terms of length of coastline to total land area, and
area of cropland to total land area, on the basis of the
available data. In each case, the group of small island
developing States included in the exercise was found to be
the most vulnerable.


        E.     Vulnerability of small island developing
               States in the context of globalization


12.  The UNCTAD paper e/ sets out criteria and factors of
island-specific vulnerability that should be taken into
consideration if one wishes to assess the economic viability
of islands. It stresses that such analysis is important to
enable policy makers to deal with the vulnerability faced by
individual island countries, with a view to preventing
marginalization of the islands in the globalizing economy.
The paper considers the main types of external shocks with
which the notion of vulnerability is associated in the context
of globalization, as well as different levels of criteria of
vulnerability (economic performance, economic structure,
intrinsic factors of economic structure).

13.  Overall, the paper demonstrates that, by analysing
island vulnerability among small island developing States
through the aforementioned factors, it is possible (a) to 
highlight important, common elements of vulnerability,
either among virtually all small island developing States or
within sub-groups of them; and (b) to provide a useful basis
for analysing the fragility of any individual island country
and designing appropriate policies for improving its
economic structure and alleviating  its vulnerability. The
benchmark of the paper is the notion of economic
specialization, which is the sphere of analysis that should
be focused on if one aims at reducing island vulnerability.
There are great advantages to analysing the potential of
some small island developing States in the light of the
success or difficulties met by other small island developing
States.


      III.     Conclusions and recommendations


14.  The expert group agreed that vulnerability indices are
meant to reflect relative economic and ecological
susceptibility to exogenous shocks, that is to say, the risk
of a country being affected by such shocks. The
vulnerability index is designed to identify which group of
countries exceed a threshold of vulnerability at which they
are particularly susceptible to risks and warrant special
attention from agencies providing assistance. At the same
time, the index and its components are intended to provide
a multidimensional approach to the identification of
programmes designed to reduce the exposure of individual
countries to exogenous factors that may affect their
development. The group concurred that vulnerability indices
should be simple to build and based on indicators that are
easy to comprehend and intuitively meaningful, and suitable
for inter-country comparisons or reflecting relative
vulnerability of small island developing States and non-small island
developing States.

15.  Judging from the results of a number of studies using
a diversity of approaches, in particular, two reports of the
Commonwealth Secretariat, the report of UNCTAD and the
reports of consultants that were submitted to the meeting,
the group concluded that:

               (a)     As a group small island developing States are
more vulnerable than other groups of developing countries;

               (b)     The vulnerability referred to is structural
vulnerability that depends on factors which are not under
the control of national authorities when the shocks occur;
the indicators should reflect exposure to shocks, that is to
say, their magnitude and their probability;
 
               (c)     A large number of possible indicators of
vulnerability can be conceived, but only those consistent
with the above definition of vulnerability should be used;
some structural handicaps cannot be considered as
vulnerability;

               (d)     Not all potentially relevant indicators can at
present be meaningfully included in a composite
vulnerability index because of constraints imposed by
insufficient data, the difficulty of quantifying some
indicators, and the need for simplicity.

16.  The expert group examined the conceptual relevance
and feasibility of a number of indicators in reflecting
structural economic and ecological vulnerability of
countries. With regard to ecological vulnerability, the group
agreed that indices should reflect the relative susceptibility
of economies to damage caused by natural disasters and
relative susceptibility of the ecology of countries to damage
caused by anthropogenic activities or exogenous factors.
The former should reflect economic vulnerability induced
by the environment and the latter, ecological vulnerability.

17.  On the basis of the available data, the expert group
examined the impact of natural disasters on a number of
economic indicators and concluded that it would be useful
and feasible to consider the frequency of occurrence of
natural disasters weighted by the percentage of the
population affected.

18.  While the group recognized that an index of human
and economic loss due to natural disasters had been
recommended to the United Nations Commission on
Sustainable Development in August 1996, it felt that, at this
stage, such a broad index would not be operationally
feasible. The group suggested that efforts should continue
to undertake systematic assessments of the economic impact
of natural disasters which could eventually be used for this
purpose.

19.  Concerning other components of an economic
vulnerability index, exposure to trade shocks was
extensively discussed. It was agreed that openness to trade
(or any indicator based on trade/GDP ratio) should not be
considered per se as an indicator of vulnerability, but that
it could be considered as a weighting factor for measuring
the exposure to risk incurred by a country. The risk could
be proxied by a concentration coefficient of exports of
goods and services, and then possibly weighted or
multiplied by an export/GDP ratio. For instance, the
indicator could be  the ratio of the three leading exports of
goods and services to GDP taken as an average for a number
of years. This indicator could be complemented by an index
of instability of the exports of goods and services.
Remittances could be added to the value of goods and
services.

20.  It was suggested that, in its future work, UNCTAD
might consider the feasibility of including services in the
computation of the concentration index, as this would
increase its relevance to small island developing States and
other developing countries.

21.  The group expressed concern at the lack of data
needed to compute variables relevant to economic
vulnerability for many small island developing States, and
recommended that emphasis be given to filling those data
gaps.

22.  It was not possible to build a composite index of
ecological fragility, i.e. vulnerability of the ecosystem, to
anthropogenic activities or exogenous factors. It was
proposed, however, that work continue on the building of
such an index, taking into account a number of factors, such
as biodiversity, climate change and sea-level rise and
exposure to oil spills.

23.  As far as the vulnerability of small island developing
States is concerned, it was suggested that a set of data,
including time-series data for the separate indicators, should
be collected for each country -- and specifically requested
when data are missing -- in order to design a vulnerability
profile covering both economic and ecological aspects.

24.  The expert group noted that many small island
developing States faced vulnerability related to social and
cultural diversity, and suggested that further studies were
needed. The group suggested that for the time being,
qualitative work in this area should continue.

25.  Finally the group considered that other groups or
bodies, such as the Committee for Development Planning,
drawing on a broad list of indicators such as those included
in the reports prepared for the meeting, could build specific
composite vulnerability indices based on the two or three
indicators which are most significant for their purposes, for
example for identification of least developed countries.


               IV.  Organization of the meeting


26.  The ad hoc expert group on vulnerability indices,
comprising 22 participants and 17 observers, met at United
Nations Headquarters, on 15 and 16 December 1997. The
list of participants and observers is contained in the
appendix to the present report.

               The officers elected for the meeting were:

               Chairman:                    Patrick Guillaumont

               Co-Chairman/Rapporteur:      Bishnodat Persaud

27.  The meeting was opened by the Under-Secretary-General 
for the Department of Economic and Social Affairs,
Mr. Nitin Desai, who welcomed the attendees and made a
statement. In his statement, Mr. Desai recalled that the idea
of vulnerability went back to the United Nations Conference
on Environment and Development. He said that the main
task of the expert group was to make a professional
assessment of vulnerability and, on the basis of their
deliberations, to make recommendations on the quantitative
parameters underlying relative vulnerability of countries.

28.  In a keynote statement, the Permanent Representative
of Samoa, Mr. T. N. Slade, spoke of the shortcomings of the
indicators currently used for determining the true social and
economic strength of small island developing States. He
expressed the need for a full and proper understanding of
vulnerability based on a technical assessment of the specific
variables suitable for building vulnerability indices, which
was necessary in order for small island developing States
to plan for and seek from the international community vital
support for their efforts at sustainable development. 

29.  Substantive services for the meeting were provided 
by the Department of Economic and Social Affairs.


                                 Notes


          a    "Alternative Economic Vulnerability Indices for Developing
               Countries". Report prepared by Lino Briguglio, Professor of
               Economics at the University of Malta, for the United Nations
               Department of Economic and Social Affairs, December 1997.

          b    "Measurement of the Vulnerability of Small States". Report
               prepared by Datuk Ramesh Chander for the Commonwealth
               Secretariat, April 1996.

          c    "Composite Vulnerability Index: A Revised Report". Prepared
               for the Commonwealth Secretariat by Dr. John Wells, Faculty
               of Economics and Politics, University of Cambridge, August
               1997.

          d    "Alternative Ecological Vulnerability Indices for Developing
               Countries with Special Reference to Small Island Developing
               States (SIDS)". Report prepared by Dennis Pantin, Senior
               Lecturer and Head of the Economics Department of the
               University of the West Indies at St. Augustine Campus, for the
               United Nations Department of Economic and Social Affairs,
               December 1997.

          e    "The Vulnerability of Small Island Developing States in the
               Context of Globalization: Common Issues and Remedies".
               Discussion paper prepared by the United Nations Conference
               on Trade and Development, December 1997.


                                  Appendix

                      List of participants/observers


Participants

Mr. Jimmy Andeng
Acting Director of National Planning Office
Vanuatu

Ambassador Carlston B. Boucher
Vice-Chairman of the Alliance of Small Island States
Permanent Mission of Barbados to the United Nations

Prof. Lino Briguglio
Islands and Small States Institute
Foundation for International Studies
University of Malta

Mr. Datuk Ramesh Chander
Consultant

Mr. Tom Crowards
Country Economist
Caribbean Development Bank

Mr. Arthur Dahl
Coordinator
System-wide Earthwatch
United Nations Environment Programme

Prof. Essam El-Hinnawi
Research Professor
Natural Resources and Environment
National Research Centre
Egypt

Mr. Pierre Encontre
Small Island Developing States Focal Point
United Nations Conference on Trade and Development

Prof. Patrick Guillaumont
Director
Centre for Study and Research for International Development
France

Dr. Russel Howorth
South Pacific Applied Geoscience Commission
(SOPAC)
SOPAC Secretariat

Dr. Jackson Karunasekera
Chief Economic Officer
Economic Affairs Division
Commonwealth Secretariat

Mr. Brent Knowles
Assistant Statistician
Research Department
Central Bank of the Bahamas

Mr. Alan March
Counsellor (Development)
Permanent Mission of Australia to the United Nations

Mr. Vladmir Markhonko
Chief, International Trade Methodology and Analysis Section
Statistics Division
United Nations Department of Economic and Social
Affairs

Dr. C. L. Mitchell
Oceans, Marine Affairs and Fisheries Policy Branch
Canadian International Development Agency

Prof. Dennis Pantin
Department of Economics
University of the West Indies
St. Augustine

Prof. Bishnodat Persaud
Coordinator for International Economic Negotiations
Caribbean Community (CARICOM)

Dr. Graham Sem
Scientist/Technical Adviser
South Pacific Regional Environment Programme
(SPREP)

Mr. Donald Shih
Officer-in-Charge
Environment Statistics Section, Statistics Division
United Nations Department of Economic and Social Affairs

Mr. P. Sikivou
Economic Policy Officer
South Pacific Forum
Development and Economic Policy Division

Ms. Gul Tanghe-Gulluova
Statistical Adviser
Human Development Report Office
United Nations Development Programme

Mr. Michael Ward
Principal Economist
Development Data Group
Development Economics
The World Bank Group


Observers

Mr. Mohamoud M. Aboud
Deputy Permanent Representative
Permanent Mission of the Comoros to the United
Nations

Miss Allison P. Christie
Second Secretary
Permanent Mission of the Bahamas to the United Nations

Dr. Carlyle Corbin
Representative for External Affairs
United States Virgin Islands

Mr. Adam Vai Delaney
Second Secretary
Permanent Mission of Papua New Guinea to the United Nations

Mr. Jone Draunimasi
Second Secretary
Permanent Mission of Fiji to the United Nations

Mr. Salim Himidi
Special Adviser
Ministry of Economics
Comoros

Mrs. Roslyn Khan-Cummings
First Secretary
Permanent Mission of Trinidad and Tobago to the United Nations

Mr. Jose' Luis Monteiro
Ambassador
Permanent Representative
Permanent Mission of Cape Verde to the United Nations

Mr. Ahmed Mujuthaba
Ambassador
Permanent Mission of Maldives to the United Nations

Mr. David Prendergast
Counsellor
Permanent Mission of Jamaica to the United Nations

Mr. Sakiusa Rabuka
Deputy Permanent Representative
Permanent Mission of Fiji  to the United Nations

George Saliba
Ambassador
Permanent Representative
Permanent Mission of Malta to the United Nations

Ms. Koreen Simon
Attache'
Permanent Mission of Guyana to the United Nations

Joy-Ann Skinner
Foreign Service Officer
Ministry of Foreign Affairs
Barbados

Mr. Tuiloma Neroni Slade
Ambassador
Chairman of AOSIS
Permanent Mission of Samoa to the United Nations

Mr. George Talbot
Second Secretary
Permanent Mission of Guyana to the United Nations

Ms. Andrea Williams-Stewart
First Secretary
Permanent Mission of Samoa to the United Nations

                           -----

 

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