Small States Biennial Conference

· Honourable Ministers,

· Secretary General of the United Nations Conference on Trade and Development (UNCTAD), Dr. Supachai Panitchpakdi,

· High Commissioners,

· Senior representatives from capitals,

· Representatives from International and Regional Organisations,

· Ladies and Gentlemen,

· It gives me great pleasure to welcome you to Marlborough House on the occasion of this inaugural small states biennial conference.

· I know that many of you have journeyed from afar to be here. It is certainly pleasing to see so many from the Pacific, Africa, Asia and the Caribbean. I hope that you have rested well and are prepared to participate fully in this important event.

· This meeting could not have come at a more crucial time. Small states continue to face manifold hurdles, and increasing challenges, particularly in the nature of exogenous shocks, in their quest for economic growth and development.

· Recognising this, and citing both “new and enduring” challenges, Commonwealth Finance Ministers, at their 2009 Meeting in Cyprus, urged the Commonwealth Secretariat to collaborate with development partners to convene a conference of small states representatives.

· Let me note at the outset that the convening of this conference is fully consistent with the Commonwealth Secretariat’s history of sustained engagement through advocacy on behalf of and capacity building support to small states.

· As far back as 1977, the issue of the inherent vulnerabilities of small states was given formal expression within the Commonwealth at the Finance Ministers Meeting, which was held in Barbados. Then In 1983, Commonwealth leaders meeting in New Delhi, sought to focus increased attention on the problems facing small states and mandated the establishment of a Commonwealth Consultative Group. Its report, “Vulnerability: Small States in the Global Society” was published in 1985. Subsequently, in 1997 a Commonwealth Advisory Group of Eminent Persons submitted their report, “A Future for Small States: Overcoming Vulnerability”. And more recently, the Commonwealth Secretariat/World Bank Joint Task Force on Small States produced, in 2000, the seminal report – “Small States: Meeting Challenges in the Global Economy”. This was followed in 2005 by an equally authoritative Review of the 2000 Joint Task Force Report.

· This is a thumb sketch of the rich history of engagement that led Finance Ministers last year to call for the convening by the Secretariat of a biennial conference of small states representives. This two-day event is a direct response to that mandate. The objective is to provide a forum for small states to identify policy approaches that can assist them in coping with their inherent vulnerability. In the process, we hope to engender as well a more collaborative approach among small states and increased responsiveness by development partners. We are persuaded that this can be achieved through sharing experiences and strengthening the exchange of good practices, developing common positions on global issues and, importantly, effective advocacy, especially by communicating the concerns and needs of small states to international agencies and development partners, some of which are present at this meeting. We greatly appreciate their attendance and participation, which speaks to growing global recognition of the need for action to assist small states.

· As is well known, 32 of the Commonwealth’s 54 members are small states. This is a constituency that has been most seriously affected by the global economic crisis. The mechanisms of transmission of the crisis, whether investment flows, trade flows, tourism flows, or flows of remittances, all impact disproportionately on small, open economies. The paradox is that while many small states are highly integrated into the global economy by virtue of their structural openness, they remain marginalised because that openness has generally not resulted in an interface that leads to strong or sustained growth and development. The data bear this out. According to the IMF, the economies of Commonwealth small states declined by 1.75 percent in 2009. This was a rate of decline significantly greater than that of the global economy, which contracted by 0.6 percent. It is noted here that developing Asia, propelled by two major locomotives, actually grew strongly in 2009, indicative of increasing resilience by some developing states, and growing capacity to cope with global volatility.

· Let me now say a few words about the agenda for this conference.

· First of all, I would wish to emphasise that it was developed in close collaboration with the regional organisations that are comprised largely of small states, and that work most closely with them – namely, the Pacific Islands Forum Secretariat, the Caribbean Community Secretariat, and the Indian Ocean Commission. The issues agreed on for discussion therefore reflect the needs and priorities of small states as identified in a consultative preparatory process.

· In these opening remarks, I will speak only briefly to some of these issues, since they will all be the subject of your deliberations over the next two days. I will offer a few comments on four areas – Finance, Trade, Private Sector Development and Climate Change.

· The openness of small economies means that flows of international finance and trade are their life blood. Direct investment flows to developing countries declined by more than a quarter to $548 billion in 2009. This has had a negative impact on small and vulnerable states in particular. UNCTAD, in its just released World Investment Report 2010, draws attention to the very high ratio of FDI to fixed capital formation in many of these countries, and thus to the disproportionate adverse impact on their economies of lower inward investment. The impact of the decline in investment flows globally is exacerbated by the limited access small states have to concessional finance and by the increased cost of borrowing in the international financial markets, where this is in fact an option. These developments highlight an issue that the global community has not paid sufficient attention to. This is the acute debt sustainability challenges faced by many small states, including some that are characterised as lower and middle income countries. It is noteworthy, for example, that of the forty developing countries that have benefitted from debt relief under the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiatives (MDRI), only ten were Commonwealth members. More to the point, of the fourteen most highly indebted countries in the world, ten are Commonwealth small island developing states (SIDS). Access to finance for these, and other developing countries, on appropriate terms and conditions, is crucial. It is against this background that both Commonwealth Heads of Government and Commonwealth Finance Ministers, at their recent meetings in 2009, expressed concern at the growing debt burden of Commonwealth small vulnerable economies, particularly in light of the global economic crisis. The Secretariat was urged to develop innovative policy options for consideration by the Commonwealth and the international community. You will be pleased to know that the Secretariat is currently working with a small group of experts to develop policy proposals both regarding the domestic and international debt financing challenges in Commonwealth Small Vulnerable Economies (SVEs), and their currently restricted access to concessional finance from the official sector.

· On trade, small states must continue to press for a fair and development-oriented outcome to the Doha Round – which quietly, and largely unremarked, completed eight years last November, making it now, dubiously, the longest running multi-lateral trade round in history. Lawyers say that justice delayed is justice denied. This must certainly just as tellingly apply to the implementation of measures to address anomalies in the multilateral trading system and to strengthen and make more effective and equitable the global regulatory framework for trade. The delay has given increased impetus to regional cooperation. This meeting will no doubt wish to pronounce on the capacity building needed to enable small states to participate more effectively in trade negotiations at both the multilateral and regional levels. At the Commonwealth Secretariat we are committed to implementing a successor phase to the highly regarded Hub and Spokes trade capacity building programme, and we are currently in discussion toward this end with the European Union and Regional Integration Organisations.

· The truth is though that proficiency in trade negotiations will not be meaningful unless small states strengthen their ability to produce and trade competitively. This cannot be done without requisite attention to the development of the private sector, which is vital to the creation of employment and wealth. As you know, both domestic and foreign investors in small states have traditionally faced well recognised constraints – among these, limited domestic markets, diseconomies of scale, limited availability of specialised skills, and remoteness, or even where there is proximity to major markets, lack of sufficient transportation links. Despite these, and other hurdles, there nevertheless must be increased effort to seize opportunities where they arise. In goods trade, the decomposition of the production process into defined stages continues apace and can prove of benefit to countries with relatively small markets and resource pools. And small states will be cognizant of the fact that in the quarter of a century between 1980 and 2006, services exports have grown faster than both global GDP and merchandise trade. The rapid growth of trade in services represent both opportunity and challenge for small states seeking to diversify beyond travel and tourism, especially into newer areas such as financial services. We are well aware that evolving regulations are often burdensome to the capacity-constrained, and we are continuing to provide technical support in this regard. At this meeting, we should think creatively how best to foster the development of the private sector in small states and how to promote export diversification.

· I am constrained to say a few words on climate change – since with a few notable exceptions, this room unarguably contains the countries most at risk. The United Nations some years ago observed that small island developing states and Least Developed Countries- which constitute two thirds of the membership of the Commonwealth - are the two groups most vulnerable to climate change. They face both the most severe physical impact and have critically limited capacity to respond to the challenge. An equitable and effective response to climate change, as well as regional and national measures which establish a viable path to low carbon growth and the green economy, are profoundly in the interest of small states. But having said this, let me recall that small states have low current and historical emissions and should not be made to bear disproportionately the burden of adjustment to low carbon growth, including by way of policy measures that affect industries and exports on which they rely. Heads of Government have requested the Secretary-General to play a good offices role for the environment and, in this regard, we will be organising a meeting here in London in October that will seek to assist members in identifying and accessing sources of climate finance.

· I have cited hurdles and challenges, but it would be pointless to meet if effective responses were not also possible. The resilience index, which resulted from the Secretariat’s collaboration with the University of Malta, recognises that building economic resilience is a consequence of good policy practices in several areas – macro-economic stability, micro-economic market efficiency, good governance, social development and cohesion and sound environmental management. The index has been piloted in St. Lucia, Seychelles and Vanuatu and is about to be deployed in Tonga and Lesotho. Over the next two days we should benefit from an exchange of experience and best practices in resilience profiling, including constraints to implementation.

· Let me conclude by expressing my confidence that our deliberations no doubt will be made richer and more valuable by the presence of so many experienced and knowledgeable participants from across the Commonwealth. Over the years, the Commonwealth Secretariat has worked actively with multilateral and regional organisations, and with bilateral agencies, to assist developing members, and especially small member states. I am pleased to see that many of our traditional partners in this endeavour – such as the World Bank, UNCTAD, DfID, AusAID, UNDESA and regional organisations – CARICOM, the Pacific Forum, and the Indian Ocean Commission, are here today. We look forward to benefiting from your insights and to deepening the collaborative and collegial approach that has always characterised our cooperation.

· The Commonwealth Secretariat will work closely with all stakeholders to ensure that this biennial small states conference delivers clear outcomes and that these are linked to the current international review processes. The two most relevant are of course the Mauritius +5 Review, which will be completed in New York this September, and in regard to which this meeting may want to identify priority outcomes for small states; and the High Level Review of the MDGs, which will also take place in September.

· Our hope is that over the next two days this conference will result in the building and strengthening of partnerships, will support evidence-based policy making, and will serve to inform both the content of advocacy and the provision of technical assistance and capacity-building to small states.

· We have placed before you a rich, detailed, and complex agenda: but there can be no more appropriate gathering of global participants to address it.

· The staff of the Commonwealth Secretariat are available throughout the next two days to facilitate productive discussions and to assist in organising bilateral meetings.

· Honourable Ministers, Excellencies, senior representatives, ladies and gentlemen, with these remarks, it is now my great pleasure to declare this Conference open. And once again, I warmly welcome you to London and to Marlborough House, and wish you fruitful and productive deliberations.

· Thank you.