Small business in small islands: a case study from Fiji

Abstract

Historically, the economic performance of small island states has been viewed in a critical, often fatalistic, light. Smallness brings with it an inability to exploit domestic scale economies, a lack of commercial or diplomatic clout, and given that small island nations are often distant from major commercial hubs, they often incur the added costs associated with insularity and remoteness. territories have high import sensitivities and relatively narrow export bases which render them especially vulnerable to exogenous shocks, such as fluctuations in world commodity price levels, military interventions, and environmental mishaps. With gross national expenditure often outpacing local value added, aid and personal remittances are often sought to balance budgets. Smallness is therefore synonymous with being powerless, vulnerable, and non-viable (Bray 1987; Bune 1987; Commonwealth Consultative Group 1985; Harden 1985). More recently, however, a second position has claimed that smallness is an inherent advantage and is characteristically associated with above-average economic growth. nations are ideal subjects for fine-tuning the internal and external balances necessary to secure competitiveness. They are able to switch quickly and flexibly from one policy direction to another. A few sizeable investments can swiftly alter the shape of the economy and perceptions about viable strategies. Moreover, small states, by definition, are commercially non-threatening and with their relatively insignificant product volume and value, tend to achieve preferential market access and avoid discriminatory trade treatment more easily than other larger countries. Small is beautiful because it is adaptable, manageable, and prone to attract sympathetic responses from potential sponsors, clients, or trading partners (Baldacchino and Greenwood 1998; Chiew 1993; Harberger 1988; Schumacher 1973; Srinivasan 1986; Trist 1980). A Different Perspective Increasingly, it is becoming evident that both the optimistic and pessimistic positions represent stereotypically biased views of the economic condition and prospects of small island nation states and territories. The debilitating effects of smallness, especially where coupled with lack of natural resources and remoteness, cannot be simply dismissed in a flourish of unsubstantiated enthusiasm. Market fragmentation, a limited labor supply and skill depository, and inadequate access to technology and investment capital are widespread and have real constraining effects. The result is often a rent-seeking economic structure, limited industrialization, a relatively large bloated public sector, and a very small private sector. The latter is also mainly engaged in commercial, import-oriented wholesale and retail trade. Export products are largely restricted to primary cash crops which experience deteriorating terms of trade beyond local control. Some export-led industrialization fuelled by foreign investment and technology has been set up, but its viability has required heavy subsidies, concessionary conditions, and often depressed wages - all necessary to make up for the other uncompetitive transaction costs (Connell 1988; Sklair 1991). On the other hand, it would be equally naive to dismiss the inherent potential of small island territories because their survival depends on a steady and substantial level of transfers from outside. Many small island beneficiaries have been more intent on assuring or deepening their dependency than on achieving some degree of self-reliance. Such an attitude is geared towards preserving the small island's consumptive capacity, generally above average on a global scale. It is also a politically convenient stance because it can be used to justify protectionist and interventionist policies. This article charts a course between economic hope and despair. It acknowledges that in spite of all the real difficulties faced, there exist some successful local ventures in these small insular locations. …

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