Island Living: A Look Inside Five Unique Island Economies

Depending on geography and history, island nations face unique economic challenges. In fact, these microeconomies are so specialized that they receive special classification from many economists. Even groups like the UN use the terminology ‘small island developing States’ to describe smaller countries situated on islands, and more clearly define their economies.

For the most part, island nations face difficulties related to isolation, size, and industry. Many are reliant on their relationships with the open seas and water. In some areas, this boils down to tourism, as people flock from international locations to take advantage of picturesque beaches. In others, the economy relies directly on the ocean, such as with tuna fisheries, which are common in the Pacific.

Regardless of the unique challenges faced, all islands have had to develop a specialized approach to economic wellness. Let’s take a closer look at five highly concentrated island economies and what local administration has done to foster financial security.

Malta: iGaming

One of Europe’s most unique economies is based in the Mediterranean. Home to hundreds of competitive global companies, the iGaming industry in Malta is now the island’s primary economic sector. Back in 2019, 89 new companies set up shop, pushing the total number of licensed online casinos to just over 300.

Historically, the island has played home to more than a few unique moments. In ancient history, Malta was the building site of some of mankind’s first temples. Moving into the modern ages, it was also used a remote outpost to banish political exiles to, such as Napoleon Bonaparte.

In more recent decades, Malta faced difficulties building a robust tourism economy as the island is small. For the last twenty years, administrators have carefully built a casino-first economy by outlining favorable terms for companies to set up shop, specifically related to security and regulation. Back in 2019, the industry was worth $1.68 billion.

Singapore: Trading

When it comes to innovation, Singapore isn’t just one of the most economically solvent nations in the world—it’s also one of the leading examples of a booming island economy. Situated at the tip of Malaysia, the city-state benefits from a unique cultural mix including Malay, Chinese, British, and Indian heritage.

Descendants from all cultures have helped boost a booming trade-based economy, which has helped push other markers of development through the roof, such as rates of higher education. Back in 2017, Singapore marked 85% gross enrollment rates. Particularly, locals are likely to pursue a career in science, technology, engineering, and mechanics.

However, the country also has a robust manufacturing sector. The largest companies focus on electronics, chemicals, biomedical products, and transportation engineering. Overall, the nation is known for competent anti-corruption laws along with having a highly secure and open economy.

Ireland: Manufacturing

Though Ireland shares a border with the UK’s Northern Ireland, much like Singapore and Malaysia, the local economy has differentiated itself as one of the world’s most developed in terms of manufacturing and productivity. Unlike many other island nations, Ireland has a strong export economy based on manufacturing rather than raw resources.

In fact, the Heritage Foundation recently ranked Ireland as the ‘third freest’ in the world for 2022. This metric harkens back not just to economic solvency, but how the health of the manufacturing sector affects daily life beyond GDP. For example, Ireland ranks high in monetary and business freedom, but low in labor freedom, which hints that constituents are protected from predatory practices.

Additionally, locals face minimal financial burdens compared to other European nations, along with a higher score related to property rights and judicial effectiveness. Today, the largest manufacturing sectors include machinery, computers, chemicals, medical devices, pharmaceuticals, and foodstuffs.

Japan: R&D

Much like neighbor South Korea, Japan has a highly complex economy that has multiple industries working behind the scenes to maintain a high GDP. Aside from manufacturing, which helps contribute to a strong export economy, Japan is also home to a high level of research and development growth.

This means a high proportion of the country’s economic GDP is funneled toward R&D projects. While the country once had one of the world’s largest economies, Japan still has a highly developed free market—which has since pivoted more toward services and manufacturing, along with agriculture and fishing. Tourism-based economies have also seen a boost in the last decade.

However, what remains the cornerstone of the Japanese economy is innovation. Clearly, Japan has vested interests in services and manufacturing, agriculture, and tourism, but the country also pours resources into researching and developing these industries. In other words, rather than play catchup, Japan’s island economy focuses on leading specific sectors.

Fiji: Tourism

So far, we’ve covered some of the most heavy-hitting industries in the world, including manufacturing, R&D, and business innovation fields like technology. However, one of the most recognizable forms of island-based economies is tourism. In economic fields, this is considered a ‘blue’ market, which depends on the ocean to attract international travelers. (Fisheries and ocean-based resources also fall under the ‘blue’ market category.)

In Fiji and other neighboring Pacific Islands, tourism is the primary source of income for many. This covers large-scale and small-scale projects, from full-blown resorts like the five-star Fiji Marriott and Royal Davui Resort to grassroots guides who create their own itineraries for tourists related to local food, dance, and culture. In other words, it caters to backpackers and luxury travelers alike.

For example, the country’s primary economic sectors include tourism and a broad services sector, which also partially encompasses tourist activities like spas, restaurants, and car rentals. Aside from this, sugar cultivation and tuna fisheries are also core markets. What makes Fiji stand out compared to other blue island-based economies is the rate of small business owners.

Large investments from other countries and groups like the IMF helped bring core investments to businesses around the island in the 1970s. Since then, social infrastructures have also been built on top of a burgeoning small-business-based economy with many locals at the helm. This also supports the tourism-based economy, which contributed to almost 40% of the country’s total GDP back in 2019, according to the Reserve Bank of Fiji.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.