WILLEMSTAD - Small Island Developing States (SIDS) are grappling with structural disadvantages that hinder their economic development. Factors such as limited population size, reliance on foreign labor, and high environmental costs contribute to elevated government expenditures and stunted economic growth, according to a study by the Economic Bureau Amsterdam (EBA).
The research, conducted by analyst Paul Tauxe, examined data from 215 countries between 2018 and 2022. It reveals that SIDS struggle to achieve economies of scale due to their isolated locations and small markets. These challenges result in imperfect competition, land-use conflicts, and higher costs for public services.
The study highlights that technological innovation could reduce import dependency. Migration and population policies could also enhance the efficiency of government spending. Additionally, fostering export-driven sectors and strengthening international cooperation are recommended to address these challenges.
The report, titled When Small Gets Too Big: Exploring Diseconomies of Scale in Island Economies, provides policymakers and international organizations with valuable insights to tackle these persistent issues.