How Innovation Can Shape a New Type of Development in Small Island Developing States

This Argument appears in vol. 74, no. 2, "Microstates and Small Island States in International Affairs" (Spring/Summer 2022).

By Riad Meddeb


Small Island Developing States (SIDS) are some of the most beautiful places in the world, yet they face a distinctive set of challenges. SIDS share common structural and fiscal contexts—including a lack of economic diversification, exposure to the effects of climate change, and issues of inclusion—that pose unique development challenges. However, while SIDS are bound together by these challenges, they also share a real opportunity for innovation, particularly innovation that leverages digital technologies and related assets such as data. This opportunity is founded on certain strengths inherent to SIDS, including agile governance, less legacy infrastructure than their larger country counterparts, and exceptional human capital.

This potential can be seen in the exploration of digital and innovative technologies led by SIDS. One recent example is the case of the Marshall Islands, which is aiming to become a global hub for Decentralized Autonomous Organization (DAO) incorporations. A DAO is a type of organization that encodes all of its rules and governance in a digital format. To push forward this agenda, the Marshall Islands has become the first sovereign nation to recognize DAOs as legal entities.

Over the last two and a half years, the COVID-19 pandemic entrenched and accelerated the potential of digital innovation for many countries, including SIDS. Of importance here is the role of these tools for public service delivery. For example, during the pandemic, countries with digital IDs and databases for government payments reached 39 percent more beneficiaries than countries without these digital assets.[1] However, innovation is also crucial for the longer-term benefit of economies and societies.

Although the pandemic accelerated digital adoption, the importance of these tools was in fact already increasing prior to the COVID-19 pandemic. The Fourth Industrial Revolution—the combination of cyber and physical tools and systems being explored across numerous sectors—is continuing to shape economies and societies around the world.[2]

Innovations ranging from AI and 5G to initiatives utilizing 3D printing have enormous scope to accelerate sustainable development. Similarly, frontier concepts, such as the Metaverse, although underexplored and unproven at scale, could also fundamentally reshape the role of governments, the private sector, and civil society. These advances could one day even make geographic borders—and geographic size—less relevant.

The importance of innovation for SIDS cannot be understated, particularly recognizing the very tangible and immediate threats of climate change. These urgent threats could propel SIDS to become leaders in leveraging innovation to demonstrate a truly inclusive Green Transition, using technology to advance prosperity, sustainability, and social equity. Evidence shows that, if managed well, the transition can be a powerful driver in creating green jobs, promoting social justice, and eradicating poverty.[3] Innovation, therefore, can be SIDS’ greatest asset and opportunity.

Why We Need a New Type of Development

The 17 Sustainable Development Goals (SDGs) highlight the scale of the development challenge. These are often considered “wicked problems:” multifaceted and multidimensional issues, cutting across social, economic, and cultural lines, which demand interdisciplinary thinking. The COVID-19 pandemic has exacerbated this challenge. Under a “COVID-19 baseline” scenario identified by the United Nations Development Programme (UNDP), an estimated 41 million people in low-and-medium income countries could be pushed into poverty by 2030. However, estimates now predictthat, post-pandemic, as many as 169 million people could be driven into extreme poverty in these countries by 2030.[4]

In addition, many small states suffer from low economic diversification that could exacerbate these outcomes. These countries are heavily dependent on tourism, service exports, and a handful of other—often vulnerable—industries.[5] This can have significant and negative multiplier effects.For example, youth unemployment rates exceed 50 percent in many SIDS,[6] which may contribute to future poverty and cycles of unemployment. However, innovation of all types can help small states to overcome some of the historic and structural barriers incurred by their particular geography, in particular by driving economic diversification and creating new economic opportunities for SIDS populations.

Although technical innovation can advance development in SIDS, there are also several challenges related to technology adoption to keep in mind. For one, access to technologies remains low in many SIDS. Around three billion people globally still lack internet access, while many lower-income countries are ill-prepared to leverage the potential of frontier technologies.[7] The risks and challenges of technical innovation—including unemployment arising from the automation of jobs, inequality and discrimination within data, and application of fair intellectual property rights—may also disproportionately affect developing countries, including and especially SIDS. Venture capital and other funding penetration is also highly variable across regions, while the intensity of research and development, including patenting rates, is strongest in higher-income countries.[8] For example, in 2013, only seven scientific and technical journal articles were published for every 1 million people in the least developed countries in Africa, compared to 1,100 journal articles per 1 million people in the OECD. Additionally, most innovation literature in the sustainable development context focuses on a handful of the lowest-income countries.[9] This may entrench inequities further by placing other lower-income countries within this homogenized group, denying them the specificity of their own experiences and contexts.

The scale and importance of these challenges demands new solutions. Existing tools and approaches will continue to be important, but innovation in development is crucial. This includes leveraging new data-driven processes to identify learning and impact, building responsive and agile regulation and governance, exploring the potential of technology to tackle marginalization, implementing true public-private partnerships to achieve scale and sustainability, and ensuring that research and development (especially for frontier technologies) are driven by the needs, realities, and aspirations of citizens.

Digital technologies, and innovation more widely, have both broadened the potential for development and expanded the number of actors involved. Development is no longer solely driven by governments or multilateral organizations. The private sector is now a crucial development leader.[10] Public-private partnerships and private-sector solutions have become essential tools in the international development toolkit. Development is also no longer solely about size or scale, with targeted interventions and agile governance playing key roles. In this emerging context, SIDS are key agents of change and have the potential to move faster than their larger country counterparts. This broadening and diversification of development potential and approaches is also important for ensuring that innovation becomes a truly global endeavor, rebalancing the inequities and asymmetries discussed above.

Finally, new and diversified forms of development financing provide an opportunity to explore innovative ways of thinking and working. The development sector has become increasingly complex and fragmented, as noted in one Brookings study:

A recurring theme in our interviews is the rise of new actors in international development. Indeed, if we combine mentions of the various new actors—the private sector, the rising power of middle income country governments, China, India—it is one of the most frequently mentioned themes in the survey. With a host of new players, the development sector is fragmenting and increasingly characterized as “a distributed network,” as one NGO leader put it, in place of what to-date has been a few actors following a more coherent shared agenda. One interviewee observed that the development structure is “shifting from a few donors to many, from grant money to diverse financing.”[11]

More recently, the growth of “patient” venture capital is also shaping the sector,[12] with a total of US$2.3 trillion invested for impact in 2020.[13] Crowdfunding still raises more than US$3.4 billion each year,[14] while technologies like distributed ledgers could drive innovation through approaches such as micropayments. These financing sources often have different structures, processes, and incentives compared to previous forms of financing, providing new opportunities to catalyze research and development, drive experimentation, and explore novel ways of doing development. With an annual financing gap of more than US$2 trillion[15] needed to achieve the SDGs by 2030 and the complexity of solutions required to tackle these global priorities, broadening of financing and funding is crucial.

Innovation Catalysts in SIDS

Innovation can shape a new type of development in SIDS. Through the efforts of UNDP, six key innovation catalysts have been identified: reduced barriers to participation in innovation, the potential afforded by data and insight, a focus on citizen needs and leaving no one behind, foundational digital innovation infrastructure that is driving change, the role of leadership within—and beyond—government, and the importance of governance. Each of these components is explored in more detail below.

Reduced Barriers to Innovation

There are many feasible and affordable approaches for SIDS to explore that are not necessarily R&D-dependent, resource-intensive, or especially tech-centric. Examples include innovative regulatory measures, such as sandboxes, that provide fintech and other start-ups with access to real-world markets or customers. The adoption of more frugal technologies, moreover, demonstrates that expensive high-tech investment is not the only approach to innovation. Additionally, the private sector is a crucial builder of much-needed digital products and services, particularly in the context of US$1 trillion in lost GDP due to digital exclusion. Governments are increasingly understanding the value and collaboration of business. Meanwhile, the above new types of financing, including tools such as patient capital, also provide opportunities for longer-term investments. This broadening of the tools available to innovators—and the lower barriers to accessing and using these approaches—offers exciting opportunities to democratize innovation for smaller states.

The Potential of Data and Insight

Data has played a key role in supporting the structural, financial, and technological transformations necessary for SIDS to respond to both the 2030 Sustainable Development Agenda and the Small Island Developing States Accelerated Modalities of Action (SAMOA) Pathway. Foundational data infrastructure is critical to enabling shared access to innovation between and within SIDS. This includes spatial data infrastructures and data communities, as well as national open data portals, like those of Jamaica[16] and Papua New Guinea.[17] However, many SIDS need to first concentrate on building domestic data infrastructure. SIDS should focus on improving data literacy within and beyond government and shaping the tools and techniques required to collect meaningful data. As SIDS face intrinsic challenges in economies of scale, data science and automation tools can be powerful assets to enhance local capabilities and drive new ways of thinking about and advancing development.

Citizen Needs and Leaving No One Behind

Innovation is not just about Big Data, 5G, or AI. The needs, realities, and aspirations of citizens must drive innovation. To this end, SIDS should work to ensure that no one is excluded from the potential of innovation. SIDS’ greatest assets are their human capital. Innovation should be an enabler and a catalyst, amplifying the talent of SIDS’ citizens and communities. Therefore, SIDS should build capacities in areas relevant to innovation, science, and technology and explore potential synergies between local and indigenous knowledge and science and technology.[18] This will be an important approach for tackling the particular form of brain drain that continues to harm SIDS’ development.[19] Similarly, capacity-building efforts should consider the unique characteristics of SIDS, the specific needs and development pathways of individual countries, as well as the local values of island peoples. Island governments in particular may need to actively shape a favorable digital culture within society, and build digital skills that, in turn, open new possibilities for participation in global information networks.

Digital Infrastructure for Innovation

Overall, SIDS are largely on track to achieve universal access to connectivity and to meet affordability targets for internet access. However, as infrastructure access expands, and the affordability of connectivity improves in SIDS, other factors such as digital skills and limited awareness of the risks posed by technology and innovation are becoming significant constraints. Outdated or ineffective regulation may also have a negative impact, including limiting the potential for meaningful competition and preventing a better market environment from developing for consumers. Guaranteeing inclusive access to digital infrastructure—from foundational connectivity to more advanced digital assets such as cloud computing and cloud processing—will accelerate SIDS’ development trajectories.

The Role of Leadership

A number of SIDS are exploring national innovation strategies. These national strategies can provide a coherent narrative for investment, serve as tools to mobilize citizens and other key stakeholders, and identify successes and impact. SIDS can take inspiration from the digital space, where many already have national digital or ICT policies. More broadly, the governments of SIDS should ensure senior political sponsorship of innovation and cultivate a long-term, cross-government commitment. These are crucial norms to ensure that innovation can reach its fullest potential in SIDS. A number of SIDS have already recognized the importance of these components, and innovation strategy and implementation have benefited from existing senior oversight and accountability.[20] This innovation leadership is not only the domain of governments or the public sector more broadly: supporting local innovators in the private sector is equally important.

The Importance of Governance

The usefulness of agility when exploring new solutions or policies is not a new concept.[21] SIDS, by virtue of their size, imperative for innovation, and proximity to real challenges, have enormous potential to advance efforts toward inclusive digital innovation. As new forms of innovation deliver new opportunities to meet the needs of citizens, they will also pose new challenges. Some of these challenges include addressing the shift and drift of digital models and platforms and ensuring inclusion in a digital setting. It is essential for SIDS governments and their partners to be responsive in this context, and as a starting point, they will need to identify the responsiveness of their respective institutions. This includes assessing internal capacity and existing engagement with innovation[22] as well as embedding experimentation, and perhaps broader policy entrepreneurship, in governments. SIDS have already demonstrated their capacity for responsiveness during the pandemic, through offline innovations such as tactical urbanism.[23] Relatedly, digital products and services can provide SIDS with unprecedented insights. This includes the role of tools such as digital analytics in building feedback loops to inform policy and service design. The latter point is premised upon a fundamental tenet of governance: it depends upon people and trust. Achieving these outcomes will require building transparency into how governments use digital and other types of innovation. SIDS will also need to work to close the “trust gap”: the difference between citizens’ expectations of how their governments leverage innovation for good and what happens in practice.

Shaping an Innovation Comparative Advantage in SIDS

The potential of innovation outlined above is already leading to positive change and impact at the national level. For example, citizen science is improving ocean quality in a number of SIDS.[24] Elsewhere, Fiji, Palau, and Samoa are each using a data aggregation and analysis tool to support health workers, improve coordination of health supplies, track outbreaks, support disaster response, and improve service delivery during the COVID-19 pandemic.[25] However, even more exciting opportunities are possible at a regional or global level that leverage the innovation catalysts identified above. In particular, there is the opportunity to drive an innovation comparative advantage across SIDS—combining the relative smallness, agility, and talent of smaller countries (alongside the falling barriers to research, development, and commercialization) into a global force for innovation.

One starting point for SIDS should be to identify shared initiatives. For example, a data community in small states is emerging, enabled through the provision of digital tools, open data, capacity-building workshops, training curricula, and finance mechanisms. This community also includes a growing number of Global South datasets, which are currently being developed as Digital Public Goods. SIDS can leverage these datasets to accelerate their digital development by using this open data to drive decision-making and policymaking. One current application of this is taking place in the Eastern and Southern Caribbean. Several states in the region, plagued by high levels of violent crime, are putting into practice insights-driven policymaking. Through the CariSECURE initiative,[26] the region is transforming its approach to addressing the root causes of violence, especially among youth. This aims to strengthen evidence-based decision making by providing Caribbean public institutions and their partners with both quantitative and qualitative data and accompanying tools for analysis.

A broader opportunity also exists in driving greater coordination and collaboration on innovation priorities. For example, combining funding for open or foundational digital hardware or infrastructure is being explored elsewhere in the global scientific community.[27] This could be achieved in SIDS through regional or SIDS-wide financing vehicles, drawing on examples ranging from national digital venture capital funds to special purpose vehicles supporting shared initiatives, such as those for submarine cables. Fixing the problem of vaccine inequity ahead of the next pandemic could also result in shared procurement infrastructure. This would be an enormously important investment for small states, generating economies of scale and narrowing the gap between large R&D efforts and smaller states.

Identifying key SIDS industries or sectors that have regional and global relevance is also important. For example, the network effects across Africa’s Orange Economy—the creative sector operating in many of the continent’s countries—demonstrate the potential of cross country collaboration and partnership.[28] However, a SIDS comparative advantage may not even be a tangible sector. A priority such as an ethical digital approach can act as a differentiator: other larger countries are simultaneously exploring ethical approaches to emerging technologies, especially artificial intelligence. SIDS could become leaders in closing the trust gap with their citizens, mentioned above, by pioneering ethical and inclusive approaches to technology through effective cross-border governance.

In addition, there is the potential to scale learning and successes across smaller states. Currently, the Caribbean is one of the greatest global proponents of digital currencies, recognizing their unique potential to overcome challenges faced by island communities excluded from mainstream banking facilities. Small states could be leaders in shaping the policies, frameworks, and technical architecture to drive digital currencies—and other types of frontier innovation around the world. Similarly, despite aspirations, it is not likely that the Metaverse and related initiatives will render borders completely irrelevant. The largest countries are still likely to dominate the digital economy. However, continued remote-working and disaggregation of the innovation value chain will see smaller-scale innovation ecosystems begin to rival their larger counterparts. Smaller states like SIDS are well-placed to leverage this opportunity in combination with e-Residency and Digital Nomad policies, in addition to other physical initiatives.

These shared assets are not a new development in the SIDS community. An interesting parallel can be drawn using the example of domain names.[29] Tuvalu, with its “.tv’” domain name, currently earns US$10 million annually[30] due to the attractiveness of this domain name for international businesses and organizations working in the television and media industries. There could be a similar revenue raising potential for Anguilla, with its “.ai” domain name, which is generating intense interest from start-ups and established companies alike working on artificial intelligence products and services. As initiatives within the Fourth Industrial Revolution intensify, SIDS may identify other unexpected types of assets and income-generating opportunities. Regulatory frameworks and other guardrails will also play an important role in shaping a SIDS-wide comparative advantage. For example, initiatives such as the Digital Economy Partnership Agreements, developed by the Government of Singapore, are a promising step toward enshrining international digital interoperability.[31] With the cross-border potential of innovation, such frameworks are necessary to enable closer cooperation between and across SIDS.

Similarly, SIDS will also need to clearly define these shared opportunities in order to drive investment. Learning from the experiences of larger countries can be valuable. Conversations between UNDP and innovation investors have highlighted that there is not a lack of capital in investment banks or other development funders. Instead, there is a lack of investment-ready initiatives at the national level. Improving abilities to better design, scope, and plan innovation projects for investment will be an important contribution to global SIDS innovation.

Finally, in shaping this innovation comparative advantage, SIDS should be driven by shared principles. The centrality of citizens and their needs, as well as related priorities such as privacy and data protection, are important. More broadly, sovereignty and self determination should not be compromised in the pursuit of regional innovation and global connectivity. There are examples of SIDS and other countries risking exploitation as global testbeds, subject to extractive processes of innovation. Collaboration across SIDS, including through harder policy levers such as targeted regulation, must protect smaller countries from becoming testbeds, playgrounds, or training models for the latest technology owned by and developed solely within larger countries. Individual SIDS can offer an exciting microcosm to explore the real-world impact of innovation, but such explorations must not be defined by asymmetry or inequity.


The narrative of SIDS has been dominated by strife and struggle. This has even seeped into the language surrounding this dynamic and global cohort—the importance of “surviving” climate change, the risks of “dependency,” and the negative implications of “small” and “developing” in the SIDS nomenclature. There is a need to redefine this narrative, to position SIDS as agents of their own change—innovators, thrivers, and leaders.

This is an urgent task. The global SDG financing gap demands new ways of thinking and doing, with innovation needed within SIDS and across the broader SIDS community: strengthening digital foundations, reversing  brain drain, and ensuring SIDS are central and active participants in global efforts to shape technological development and implementation. Moreover, this must be driven by the importance of ensuring that no one is left behind.

In addition to being urgent, the pursuit of inclusive digital innovation must also be a truly collaborative endeavor, one requiring focused efforts from government, the private sector, academia, and civil society. This holistic approach is essential to leverage the opportunities set out in this article. Data can only lead to positive change if its insight and potential is recognized by governments. The benefits of lowered barriers to innovation grow exponentially when the private sector in SIDS is empowered. Data and insight can only lead to positive change if its potential is recognized by government. Digital infrastructure must serve the very last-mile. While leadership and good governance are key assets in delivering inclusive, sustainable, and successful digital economies.

Leadership and good governance are particularly essential yet also demand longer-term thinking. Leveraging and benefiting from innovation requires a generational shift, in close collaboration with citizens. Furthermore, there is a need to drive leadership within the SIDS community, beyond the coastal borders of countries. This includes the shaping of an innovation comparative advantage across SIDS, from the operational level through collaborations in procurement and other technical priorities to defining and implementing shared innovation propositions—including drawing on traditional and indigenous knowledge. SIDS governments should also work towards the shared leadership of global priorities in the context of the digital economy and the Fourth Industrial Revolution.

Each of these priorities must be founded on—and driven by—the needs, realities, and aspirations of citizens in SIDS. This includes the importance of shaping feedback loops with citizens to ensure that innovation continues to benefit those who need it most. SIDS governments should also be encouraged by the interest and engagement of their citizens regarding the importance of digital and innovation for development. Forthcoming research by UNDP highlights real appetite within SIDS populations, and that many citizens are already “on-side.” They want their governments to be exploring, leading, advocating, and implementing digital and innovation. They want their governments to be bold. Most importantly, the benefits and strengths of digital innovation for SIDS are not solely found in the platforms, solutions, or technology of the 21st Century. It is not just about Big Data, 5G, Artificial Intelligence—or high-tech, or more frugal, innovation. The centrality of citizens in the development of SIDS reaffirms that SIDS’ greatest asset is their human capital. Innovation is not a replacement or substitute, but rather an enabler, catalyst, and amplifier of the talent of SIDS’ citizens and communities.

[1] Riccardo Puliti, “Digital inclusion unlocks a more resilient recovery for all,” World Bank Blogs, March 1, 2022,

[2] Celine Herweijer et al., “ Enabling a sustainable Fourth Industrial Revolution: How G20 countries can create the conditions for emerging technologies to benefit people and the planet,” G20 Insights, May 22, 2017,

[3] International Labour Organization, World Employment and Social Outlook 2018: Greening with Jobs (Geneva: International Labour Organization, 2018),

[4] Babatunde Abidoye et al., “Impact of COVID-19 on the SDGs: Ensuring No One is Left Behind In COVID-19 Recovery,” United Nations Development Programme and Frederick S. Pardee Center for International Futures, 2021,

[5] United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, “Vaccinations and COVID-19 Funding for Small Island Developing States,”

[6] UN Sustainable Development Goals Partnerships, “Sustainable development through decent jobs for youth,”

[7] The UNCTAD Technology and Innovation Report 2021 highlights a lower “average frontier technology readiness index score” in many lower-income geographies.

[8] See the WIPO Global Innovation Index 2020.

[9] Rasmus Lema, Erika Kraemer-Mbula, and Marija Rakas, “Innovation in developing countries: examining two decades of research,” Innovation and Development 11, no. 2-3 (2021): 189-210,

[10] Lorenzo Pavone et al., “How the private sector can advance development,” OECD,

[11] George Ingram and Kristin M. Lord, “Report: Global development disrupted: Findings from a survey of 93 leaders,” Brookings, March 26, 2019,

[12] “Catalytic Capital: Unlocking more investment and impact,” Tideline, March 2019,

[13] Ariane Volk, “Investing for Impact: The Global Impact Investing Market 2020,” International Finance Corporation, July 2021,

[14] John Bergdoll, “Crowdfunding raises over $34 billion a year. Here are four things you may not know about it.,” World Economic Forum, June 11, 2021,

[15] “COVID-19 crisis threatens Sustainable Development Goals financing,” OECD, October 11, 2020,

[16] “Jamaica Open Data,” Government of Jamaica,

[17] “Papua New Guinea Environment Data Portal,” Secretariat of the Pacific Regional Environment Programme,

[18] Benjamin Keller, “Youth in SIDS are transforming classical industries through innovations in digital technologies,” Spark Blue, May 2, 2022,

[19] D. de la Croix, F. Docquier, and M. Schiff, “Brain Drain and Economic Performance in Small Island Developing States,” IRES, Université Catholique de Louvain, 2013,

[20] Riad Meddeb, “Small island developing states do not have the luxury of time,” UNDP Blog, December 2, 2020,

[21] “Agile Governance: Reimagining Policy-making in the Fourth Industrial Revolution,” World Economic Forum, January 2018,

[22] See, as an example, the “Innovation Barometer” developed by the Dutch government:

[23] Ali Estefam, “Case study: use of Rapid Ethnographic research for participatory urban design,” Journal of Science-Informed Design, December 8, 2020,

[24] Ana Carolina Moreira de Oliveira, Ana Carolina de Azevedo Mazzuco, and Bianca Reis Castaldi Tocci, “Fragments in the Ocean,” ECO, June 21, 2021,

[25] Zoe Wang, “Data-Driven Health Logistics In The Indo-Pacific,” Mapbox Blog, October 5, 2021,

[26] “CariSECURE,” UNDP Latin America and the Caribbean,

[27] Julieta Arancio and Shannon Dosemagen, “Bringing Open Source to the Global Lab Bench,” Issues in Science and Technology 38, no. 2 (Winter 2022): 18–20, hardware-gosh-arancio-dosemagen/.

[28] Charlotte Ashamu, “How Africa’s Cultural Institutions are Leading the Way in Audience Development and Research,” Hyperallergic, November 22, 2021,

[29] For example, “.sg” is the Country-Code Top-Level Domain for Singapore.

[30] Ashley Westerman, “Tuvalu cashes in on its coveted internet domain name amid rise in online streaming,” The World, January 24, 2022,

[31] “Digital Economy Partnership Agreement (DEPA),” Singapore Ministry of Trade and Industry,