The presentation is about the main characteristics of the MIRAB model and the Pacific small islands it described, their sustainability and vulnerabilities.

1. INRL 6003
SMALL STATES IN THE GLOBAL SYSTEM
MIRAB model and small states
WEEK FOUR
Dr. Jacqueline LAGUARDIA MARTINEZ
INSTITUTE OF INTERNATIONAL RELATIONS
UNIVERSITY OF THE WEST INDIES
Jacqueline.Laguardia-Martinez@sta.uwi.edu

2. What is MIRAB?
• Concept Developed by Bertram and Watters (1985)
• Significant discrepancy between export production and import consumption (defining
characteristic of MIRAB economies)
• To finance a current-account expenditure, a MIRAB economy rely on various types of current-account
transfer payments to finance a large part of their import requirements
• Two sets of current-account transfer receipts (remittances and official aid) plus one sort of no
tradable output, government services
• “Conventional models of economic and social development… incorporate labor migration,
remittances, overseas aid, and the government sector, but assume that these form part of the
development process without dominating it. Our concern here is with a class of economies and
societies in which the combined effect of ‘MIRAB’ now determines the evolution of the system”
(Bertram and Watters 1985: 497).
A economic process where remittances and foreign aid are the main
economic resources of the local economy

3. Flow charts for two processes that sustain the functioning of MIRAB economies
Clem Tisdell, The MIRAB Model of Small Island Economies in the Pacific and their Security Issues

4. • The stock of overseas-resident migrants and their descendants, to which were
harnessed the flows of remittances and new migration; and
• The stock of domestic public-sector employment sustained by the flow of aid
Those two stock-flow nexuses made up our acronym MIRAB
MIgration Remittances, and Aid-Bureaucracy

7. The Pacific region
• https://www.youtube.com/watch?v=FqnqQK7rf7g
• https://www.youtube.com/watch?v=-Lq-7b1e77w (Samoa, SIDS, 2014)

8. Why the Pacific?
• Concept initially applied to Pacific Islands, which are many (20,000 – 30,000) and
dispersed
• To explain transition from the former colonial export economies occurred in the
Pacific Islands (Cook Islands, Niue, Tokelau, Kiribati, Tuvalu, Samoa and Tonga)
• Infrastructure (schools, hospitals, roads, reef passages, port facilities, airfields, radio
communication links, housing, water supply, wastewater treatment, government
buildings), all had been provided by the colonial powers, and were kept in operation
by post-colonial aid
• Larger export-oriented ventures kept alive only by ongoing subsidies or special
treatment from aid donors

9. Why the Pacific?
• Open economies
• Draws attention to ‘rentier’ nature of Pacific economies
• Aid and remittances perform same function as resource ‘rents’ (oil)
• Leads to ‘Dutch disease’: ↑ rents = ↑ foreign exchange earnings = ↑ currency
appreciation (no tradable sector) = ↓ external competitiveness …
• External debt remains modest
• The provision of foreign aid is mainly used to fund the government bureaucracy
• Subsistence agriculture/fishing as an ‘insurance floor’
• Gross inequalities of income and wealth are the exception rather than the rule
• Close integration of informal and formal sectors of the economy

10. Logic of a MIRAB
• Remittances, interest and dividend payments, aid, and other official
transfer payments, are sources of disposable income that do not arise
directly from the sale of commodities
• The expanded bureaucracy has no productive role other than the
administration of infrastructure and the spending of salaries within
the local economy
• Little stimulation of tradable sector (even with aid aimed at this)

11. CRITICS

12. Critics to the MIRAB model
• It is considered a reductionist exercise, which fails to engage with the richness and detail of social
and economic reality (economics – centered)
• Great reluctance on the part of officials and economists, from South Pacific countries, regional
institutions, donor country agencies, the International Monetary Fund, or the World Bank, to
accept this development model as a valid and sustainable one
• The model is in some sense derogatory of islanders because it applauds economic “failure” (by
the standards of development orthodoxy)
• Aid and remittances keep the domestic economy “frozen” in a state of low productivity
• Crowding-out effect of remittances, combined with “easy subsistence lifestyle”: remittances
appear to be spent mostly on “nonproductive” housing and consumption expenditure not for
productive investment
• Crowding-out effect of aid on the public sector’s human resources: the management of aid
requires much time from the best civil servants, which detracts from other important tasks
• This situation is not sustainable in the long run

13. VULNERABILITY

14. The sustainability or otherwise of MIRAB economies remains an
open research issue, since in the long run, remittances may suffer
decay and aid donors may suffer fatigue
• Remittances are motivated by altruistic motives, and as a result, are likely to
decline over time as the altruistic feeling might weaken with years away from
home
• Possible decline in transnational engagement among second and
subsequent generation members of diaspora
• Later generations of migrants exhibit loss of motivation to remit and to
participate in home nation-building

15. Logics to justify the MIRAB model
• The “unsustainability” of economies based on migration, remittances, and aid might need to be
reconsidered
• The MIRAB territories do not get money for nothing. They export LABOR (migration and
remittances) and “GEOSTRATEGIC SERVICES” (foreign aid)
• By exporting labor and geostrategic services MIRAB economies make the best use of the only
comparative advantage they may have that allows them to gain from international trade
• The Islanders are just taking full advantage of the open-economy situation when allocating
resources (labor) where returns are higher
• Donor countries and migrant host countries also gain from this form of international specialization
• Remittances are repayments of a loan made earlier to the remitter by relatives to help finance
human capital investment; money lent to young children or other relatives to help them finance
their education; and money sent to prepare for future retirement in the home country (informal
family credit market)
• As long as the migrant population is composed mainly of adults wishing to retire in the home
country, it is very unlikely that the remittance flow will decay over time

16. GEOSTRATEGIC SERVICES
• Islands have more strategic importance than continental countries of
equivalent land area
1. they command great surfaces of ocean (fishing resources)
2. they are often just off the coast of great continental countries
3. they are ideal “aircraft carriers,” missile bases, or radar bases in case of war
4. they are used for atomic or ballistic experiments, because they are “out of
the way” and difficult to spy on by rival powers, and because their isolation
minimizes the risk of such experiments for the home population
What when the demand for strategic services falls somewhat?

17. The rapid expansion of tourism as a leading sector and offshore banking was
not predicted in the original MIRAB model (services-oriented small
economies)
Which is the appropriate
model(s) that best captures the
structure, behavior and
development strategy of small
island economies today?

18. Alternative classifications: PROFIT
• The three aspects that distinguish PROFIT from MIRAB models are: the
dynamism of the private sector, the active role of domestic policy, and the
strategic orientation towards diversification (Baldacchino, 2006)
• PROFIT would have more manufacturing and resource management; a
diplomacy driven by procedural considerations rather than a direct quest for aid;
a low reliance on aid and remittances to sustain local incomes, and strong
financial management
• Also PROFIT economies would differ from MIRAB by being more interested in: a
shrewd immigration and cyclical migration policy; engaging in tough external
negotiations concerning the use of local mineral, natural, political and other
imaginative resources; securing and controlling viable means of transportation;
and luring foreign direct investment via very low/no taxes
• PROFIT examples would include tax and insurance havens, offshore banking
centers, and duty-free manufacturing exporters

19. PROFIT
• Five dimensions of local jurisdictional autonomy are laid out by Baldacchino:
1. P (people considerations): powers over movement of persons (including issues of
citizenship, residence and employment rights)
2. R (resource management): powers over environmental policy, especially regarding
natural resources
3. O (overseas engagement and ultra-national recognition): the exercise of “para-diplomacy”
by sub-national governments acting as though they are sovereign states
4. FI : finance, insurance and taxation
5. T (transportation): powers over access by air and sea
Baldacchino highlights the ability of small nations to make strategic political decisions in
the global context which enhance their economic welfare, for example, act as tax havens,
provide flags of convenience for shipping, obtain rents from their natural resources and
benefit from the presence of military installations. In some instances, these attributes
are combined with tourism, foreign aid and remittances.

20. SITE
• STID (Small Tourism-driven Island Destinations) or (McElroy, 2006) SITE model
characterized by postwar diversification, stressed the role of labor-intensive tourism
development and related construction as a major engine of insular modernization
• The specialized tourist islands heavily reliant on foreign direct investment in infrastructure
and facilities and characterized by GDP growth volatility (itself a function of natural
disasters and excessive export concentration), loss of preferential export markets, and in
some cases drastic declines in per capita aid following the post-1990 collapse of the Soviet
Union
• Prominent role of government policy in promoting tourism, designing tax holidays to
attract foreign hotel investment, and negotiating airline access
• PROFIT-SITE islands that share the common feature of restructuring away from colonial
agriculture (towards tourism, offshore finance or high-value manufacturing exports)
• (Guthunz and von Krosigh, 1996) TOURAB typifies those economies that depend heavily
on tourism and the distribution of aid via the public bureaucracy. It has received little
coverage in the literature

21. Geoff Bertram, The Mirab Model in The 21st Century

22. Differences between MIRAB and PROFIT-SITE economies
• In contrast to PROFIT-SITE destinations, the MIRAB economies generally
exhibit relatively large public sectors, less effective use of jurisdictional
power to create dynamic private sectors, lower levels of post-colonial
restructuring and economic modernization, and a more systemic
dependence on aid and remittances to maintain living standards
• The traditional pursuits of small-scale agriculture and fishing tend to be
much more prominent in many MIRAB islands, while their geographic
remoteness of developed economies inhibits the growth of other forms of
private sector activity

23. What is the comparative advantage of a
small island economy?
Is MIRAB still useful?

24. http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:23554937~pagePK:64165401~pi
PK:64165026~theSitePK:476883,00.html

27. According to the World Bank
• Nearly 1 out of 7 persons in the world being either an international or an internal migrant
• Women accounted for 48 % of international migrants
• Growth in remittance flows to developing countries is expected to accelerate to an annual
average of 8.4 % over the next three years, raising flows to $436 billion in 2014 and $516
billion in 2016
• Rising anti-immigrant sentiment: Saudi Arabia deported more than 370,000 migrants in the 5
months since November 2013; about 1,000 Sudanese were deported from Israel; over
368,000 people were deported in 2013 in the US; anti-immigration movements appear to be
gaining momentum in Europe
• Asylum claims in 44 industrialized countries reached 612,700 in 2013
• In contrast with common perceptions, South-South migration was larger than South-North
migration: 82.3 million (36 %) of migrants from developing countries lived in another
developing country, compared to 81.9 million (35 % of migrants from the South) lived in a
developed country

28. Effects of migration in small states

29. Migrants, a resource?
• Instead of viewing the emigration of skilled people as a loss, many
economists and policymakers view it as an opportunity to get trade and
investment projects and new knowledge
• Migration raises the domestic skill level because the hope of getting a
well-paying job with good working conditions abroad encourages citizens
to enroll in professional schools
• The skills of the diasporas can be tapped by establishing knowledge
exchange networks. Some initiatives include mentor-sponsor programs in
certain sectors or industries, joint research projects, peer reviewer
mechanisms, virtual return (through distance teaching and e-learning),
and short-term visits and assignments

30. Boosting trade and investment flows
• Migrants have a preference for their native country’s goods and services, thus supporting “nostalgic
trade” in ethnic products
• Migrants facilitate bilateral trade and investment flows between their country of residence and their
home country by matching producers of consumer goods in one country with appropriate distributors in
the other country
• Migrants increase investment flows between sending and receiving countries because they possess
important information that can help identify investment opportunities and facilitate compliance with
regulatory requirements
• Migrants may be more willing than other investors to take on risks in their origin country because they
are better able to evaluate investment opportunities and possess contacts to facilitate the investment
process
• Migrants provide reliable sources of funding and can be a more stable source of funds than other
foreign investors because their familiarity with the home country often gives them a lower perception
of risk
• Migrants generally are less concerned with devaluation risk because they are more likely to have a use
for local currency
• Migrants may also provide origin-country firms access to technology and skills through professional
associations

31. Diaspora bonds
• A diaspora bond is a debt instrument issued by a country to raise financing
from its overseas diaspora
• The money raised through diaspora issuances could be used to finance projects
that interest overseas migrants— such as housing, schools, hospitals, and
infrastructure projects that have a concrete benefit to their families or the
community back home.
• Diaspora bonds can tap into the emotional ties—the desire to give back—of the
diaspora and potentially help lower the cost of financing for development
projects back home
• Israel and India South Africa, Sri Lanka, Ghana, Kenya and the Philippines
• No country in the Caribbean has actually issued a diaspora bond
https://www.youtube.com/watch?v=JDGu73_irJ0

32. How to encourage diaspora participation?
• A few African countries have established
government agencies to encourage diasporas
to invest, assist local communities and
provide policy advice
• Eased restrictions on foreign land ownership
• Allowing dual citizenship

33. http://data.worldbank.org/indicator/DT.ODA.ODAT.CD/countries/1W?display=map

34. Official Development Assistance (ODA)
https://www.youtube.com/watch?v=csWQBsJhmVI

35. http://data.worldbank.org/indicator/DT.ODA.ODAT.CD/countries/1W?display=graph

36. Measuring bureaucratic quality
• The bureaucratic arena refers to all state organizations engaged in formulating and
implementing policy as well as in regulating and delivering services
• The relationship between bureaucratic performance and economic growth and
development outcomes has been a subject of interest
• Bureaucratic quality normally is just one, and very often a marginal, aspect in
assessments of institutional quality
• Linked to the assessment of:
1. Corruption
2. Government intervention
3. Influence of higher civil servants a part of the policy-making process)
4. Meritocracy
5. Accountability
6. Transparency (clear decision-making processes in the civil service)
7. Access to public services

37. Measuring quality of government
• Several indicators
1. level of bureaucracy government transparency
2. level of effectiveness
3. level of corruption
• Several kinds of governance indicators for mapping and comparing
countries’ administrative performance and bureaucratic quality
internationally
• The number of available indicators is increasing, yet their use has
remained limited in the public administration research community
• The relationship between rules and structures, on the one hand, and
performance, on the other, is difficult to establish

38. Steven Van de Walle, Measuring bureaucratic quality in governance indicators

39. Bibliography
• Geoff Bertram, The MIRAB Model in The 21st Century, VIII International
Conference “Changing Islands – Changing Worlds”, November 2004
• Geoff Bertram, The MIRAB Model Twelve Years On, “The Contemporary
Pacific”, Volume 11, Number 1, Spring 1999, 105–138
• Ashley Oberst and Jerome L. McElroy, Contrasting Socio-Economic and
Demographic Profiles of Two, Small Island, Economic Species: MIRAB versus
PROFIT/SITE, “Island Studies Journal”, Vol. 2, No. 2, 2007, pp. 163-176
• Steven Van De Walle, Measuring bureaucratic quality in governance
indicators, Paper for the 8th Public Management Research Conference, Los
Angeles, Sep 29th - Oct 1st, 2005
• Bernard Poirine, Should We Hate or Love MIRAB?
• Clem Tisdell, The MIRAB Model of Small Island Economies in the Pacific and
their Security Issues: Revised Version, Working Paper No. 58

40. Article Synopses
• Group 1: Bernal, R ‘Participation of Small Developing Economies in the
Multilateral Trading System’, CIGI Working Paper No. 44, 2009. At:
www.cigionline.org
• Group 2: Heron, T. ‘Small States and the Politics of Multilateral Trade
Liberalization’, The Round Table, 97, 395, 2008
• Group 3: Bishop, M L, Heron, T and A Payne ‘Caribbean Development
Alternatives and the CARIFORUM-European Union Economic Partnership
Agreement, Journal of International Relations and Development, 2012, iFirst.
• Group 4: Ramsaran, R and R Hosein. ‘CARICOM: Some Salient Factors
Affecting Trade and Competitiveness’, The Round Table, 97, 396, 2008.