1. FDI & Local Linkages in Small Island Economies: Fiji & Samoa Robert Read & Nigel Driffield Universities of Lancaster & Aston, UK

2. FDI Inflows to Small States Hypotheses: They receive less than proportionate FDI inflows because of their size.xThey receive less than proportionate FDI inflows because of their size.x They receive less than proportionate FDI inflows because of their incomes.They receive less than proportionate FDI inflows because of their incomes. FDI inflows are associated with key growth sectors – tourism, services, resources.FDI inflows are associated with key growth sectors – tourism, services, resources.

3. FDI & Linkage Creation Direct Linkages Employment & TechnologyEmployment & Technology Vertical (Upstream & Downstream)Vertical (Upstream & Downstream) Indirect Linkages (Spillovers) Technology & KnowledgeTechnology & Knowledge AgglomerationAgglomeration CompetitionCompetition

4. Case Study Methodology Five case studies of firms in Fiji and Samoa, 2003 - natural resource processing and manufacturing. Firm-level questionnaires and interviews.Firm-level questionnaires and interviews. Interviews with ministries, agencies and other local institutions.Interviews with ministries, agencies and other local institutions.

5. Employment & Technology Impacts determined by relative labour intensity and technological sophistication. Also constrained by skill shortages. Natural Resources: Limited employment effects and standard technology.Natural Resources: Limited employment effects and standard technology. Manufacturing: More substantial effects with some advanced technology.Manufacturing: More substantial effects with some advanced technology.

6. Vertical Linkages Upstream impact determined by input sources. Downstream impact limited by high export- orientation. Natural Resources: Generally substantial upstream linkages, limited downstream.Natural Resources: Generally substantial upstream linkages, limited downstream. Manufacturing: Export platform activity with few vertical linkages.Manufacturing: Export platform activity with few vertical linkages.

7. Spillover ( Indirect ) Effects Some evidence of spillover effects but not always positive. Technology & Knowledge: Limited by low labour turnover (unemployment).Technology & Knowledge: Limited by low labour turnover (unemployment). Agglomeration: Some in manufacturing.Agglomeration: Some in manufacturing. Competition: Evidence of positive (entry barriers) and negative effects (monopoly).Competition: Evidence of positive (entry barriers) and negative effects (monopoly).

8. Constraints on Linkage Creation in Small States Level of development: Limits the type of linkages created.Level of development: Limits the type of linkages created. Type of FDI inflows:Type of FDI inflows: -Resource FDI focused on local inputs. -Manufacturing FDI focused on employment. Shallow economic structure: Limits the potential scope for linkages.Shallow economic structure: Limits the potential scope for linkages.

9. General Constraints on Linkage Creation The availability of local skillsThe availability of local skills Limited labour with requisite skills – result of out-migration, lack of employment opportunities and insufficient training. Policies to create local linkagesPolicies to create local linkages Insufficient effort made to maximise linkage effects – excessive focus on attracting FDI, regardless of likely impacts.

10. Conclusions Small island states, such as those in the Pacific, can attract FDI inflows.Small island states, such as those in the Pacific, can attract FDI inflows. These FDI inflows can generate an array of local linkage and spillover effects.These FDI inflows can generate an array of local linkage and spillover effects. These linkages have emerged in spite of the limited potential for their creation in small island states.These linkages have emerged in spite of the limited potential for their creation in small island states.

11. Case Study Local Linkages TechnologyEmploymentBackwardForwardSpillovers Tuna – Fiji Tuna – Fiji Tuna – Samoa Tuna – Samoa Coconut Coconut – Samoa – Samoax Footwear Footwear - Fiji - Fiji Apparel Apparel - Fiji - Fijix