SMALL ISLAND DEVELOPING STATES
Applying AI for the future of SIDS The case for developing island knowledge economies By Nicholas K. Smith, OPEC Fund W hen you ask people to picture their dream vacation, chances
“By harnessing the power of innovation, SIDS can develop their own sustainable solutions.” Engines of growth: Building knowledge economies in SIDS , ODI Global
Susceptible to natural disasters such as hurricanes, dependent on external commerce and far away from immediate help, or escape, during an emergency, SIDS face a number of serious hurdles on the path to a climate-resilient future. The United Nations Development Programme’s (UNDP) 2024 publication Small Island Digital States: How Digital Can Catalyse SIDS Development laid out some of the ways digitalization can improve livelihoods in some of the world’s most climate-precarious countries. For one, economies that primarily rely on tourism and agriculture can branch out into areas like e-commerce, software development and outsourcing. This prevents both external shocks and the brain drain that comes with citizens heading to new places for work. Digital access to key services can improve education and healthcare while online banking services promote entrepreneurship and investment in remote areas far from traditional financial institutions. Investing in the digital transformation and knowledge economy can help
countries can use to power their economies. The study Engines of growth points out the uneven progress of SIDS: “Jamaica, Barbados, and Trinidad and Tobago, for example, have established knowledge- based service export economies centred on software development, data management, information technology, and specialised expertise in law, medicine and engineering.” According to one estimate, in 2022 these countries generated a combined US$1.5 billion in knowledge-based service exports. On the flipside, Guinea Bissau and Comoros, both categorized as Least Developed Countries, have the lowest percentage of internet usage among all SIDS, at 35.2 and 27.3 percent, respectively. (For comparison, an average of 78 percent of people in Caribbean SIDS are online.)
are a tropical island is the first thing that pops into mind. If you ask them to picture a place of technological innovation, the answer might be a different geographical feature: a valley (namely Silicon Valley). The future of development might actually be a combination of these two things – the island and the valley. At least that’s the case made by recent development studies: Small Island Developing States (SIDS) can better ensure their futures by embracing new technologies like AI, blockchain and the Internet of Things. “By harnessing the power of innovation, SIDS can develop their own sustainable solutions, aligning themselves with the global green technological revolution,” write the authors of a new working paper from ODI Global, a UK-based think tank. Published in March 2025, Engines of growth: Building knowledge economies in SIDS examines the potential these countries can unlock by leaning into cutting-edge technology to drive economic resilience and diversification, as well as to quickly adopt green technologies that will (in theory) keep the worst effects of climate change at bay. The United Nations considers 39 sovereign states and 18 dependent territories as SIDS. They are geographically diverse, spread across the Caribbean, Pacific, Indian Ocean and the South China Sea. What they have in common is a serious vulnerability to climate change.
realize that future. Simply put, the knowledge economy is the idea that the primary driver
of economic growth is not traditional economic sectors that produce tangible assets, but knowledge-intensive products and services.
In other words, it is the computer terminal, not the factory floor, that
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