Working Smart and Small

The Role of Knowledge-based and Service Industries in Growth Strategies for Small States

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Small states face serious challenges for development due to their size, remoteness and vulnerability. In recent years, the prospects for small states have deteriorated further due to preference erosion and the emergence of larger competitors such as India and China. Working Smart and Small suggests how small states can reposition themselves in the global economy and move into knowledge-based and service industries.

Part I provides an overview of general factors stimulating or constraining the development of services sector and trade in services. It also identifies key trends and provides analysis.

Part II gives six case study examples of how some small states have promoted knowledge-based and service industries in their economies. The small states studied, from different regions and income groups, are Botswana, Mauritius, St. Lucia, Singapore, United Arab Emirates and Vanuatu. The studies cover the performance and supporting factors in five promising service sectors: the financial sector, information and communication technologies, education, professional services and tourism.

Part III considers the policy implications.

This book will be of particular interest to economic policy-makers and researchers working on issues of concern to small states.



Being Small: Old and New Challenges

This chapter reviews the general developmental challenges faced by small states, which relate to their size and location. Earlier literature identifies private sector development, especially in the manufacturing sector, as one of the primary concerns in these states (Winters and Martins, 2005; Briguglio et al., 2006; Pollard, 2007). Due to their small populations, the domestic market size is also small in these countries. As a result, most of the firms in small states are small and medium enterprises with limited opportunities for reaping the benefits of economies of scale and investing in research and development. Hence, unit costs of production are higher as compared to those in larger economies. Also, most small states have a poor investment climate, weak institutions, are remote and lack skilled labour or adequate human capital, which limits access to external capital and constrains industrial development.


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