Graduating from Least Developed Country to Middle Income Country Status: A Trap for Small Island Developing States?

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Faure, Christian
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University of Malta; DiploFoundation
SIDS tends to perform particularly well with regards to their socio-economic achievements and development endeavours. As a result, several SIDS graduate from their Least Development Country status to Middle-Income Country status. This graduation implies that SIDS are much better-off economically and can do without the special treatments and benefits in terms of Overseas Development Assistance that they were receiving as an LDC. However, and this is the thrust of the argument in this paper, this is not the case at all. The support was and is crucial to SIDS. After all, it was the catalyst which helped them progress and graduate in the first place. Without the financial assistance, post-graduation, many SIDS struggle to sustain these achievements. Essentially, finding themselves trapped.Additionally, this research examines the inherent vulnerabilities of SIDS; particularly, their economic and environmental vulnerabilities, caused by their small size, small population, dependence on trade etc… This research looks at two theories which could apply to SIDS once they have graduated to MIC status, to sustain the socio-economic progress made: The Export Diversification Model and the Development Aid Theory. In practical terms, the research leans towards the application of the Development Aid theory. This paper studies the various classification models designed by the UN; - LDCs, MIC, SIDS, LLDC, LICUS; the graduation model the UN applies for the graduation and highlights some weaknesses with the model, and also discusses the graduation process. This dissertation also focuses on some weaknesses which SIDS needs to address moving forward, for example, the limited definition of SIDS itself. The role of foreign aid and a case study on the graduation experience of the Maldives Islands is highlighted and finally this paper concludes that SIDS do find themselves worse-off when they graduate because they do not receive the benefits they were previously obtaining as an LDC. To close, this paper proposes some recommendations.