The importance of institution building in small island states

Abstract. This paper argues that the need for institutional capacity-building for development is essential for small island states, more so than larger ones, due mostly to the former’s high degree of exposure to exogenous shocks. Given that small island states tend to depend heavily on international trade, an appropriate institutional set-up for such states would need to be one that promotes competitiveness. Given also that small island states are highly exposed to external shocks, their institutional set-up should promote economic resilience. In addition, given that environmental concerns are so closely interlinked with economic development in small island states, it is essential that the institutional set-up in these states promotes sustainable development. However, the paper also recognises that weaknesses in institutional capacities is a common constraint shared by small island states and this poses a major challenge in responding to the changing international trade environment