Market Systems Approach for Digital Public Service Delivery in Small Island Developing States: The Potential to Make a Difference

Introduction

All countries in the world are facing different issues when it comes to delivering public services. My experiences in different countries in Asia, Africa and Europe suggest that even though the service quality could be very different, the challenges are present in every context. As I switch between MSD and digital development hats, I was wondering why not try to wear both the hats and see what happens. I am considering this as a thought exercise to organize the thoughts and ideas I have developed over the years.

Among the developing countries the Small Island Developing States (SIDS) face some unique challenges in delivering public services to their citizens. Geographical isolation & dispersion, limited resources, and high vulnerability to climate change create a complex environment for governance. However, the digital age offers new opportunities for these nations to overcome traditional barriers and redesign the public service delivery mechanisms. This blog post explores how the Market Systems Development (MSD) approach can be leveraged to create effective, sustainable digital public services for SIDS.

Understanding SIDS and Their Unique Context

Small Island Developing States are a distinct group of developing countries facing specific social, economic, and environmental vulnerabilities. These nations are generally characterized by:

1. Small populations and limited land resources

2. Geographic isolation, dispersion and high transportation costs

3. Remarkably high vulnerability to natural disasters and climate change

4. Limited economic diversification and reliance on tourism

5. Dependency on international aid

6. High costs for energy and infrastructure development

These characteristics create both challenges and opportunities for digital public service delivery, making the application of MSD principles particularly relevant for sustainability and reducing the government expense while increasing efficiency. One noteworthy case could be mentioned here, is the case of Electronic Police Clerance Certificate (ePCC) in Vanuatu. The police clearance certificate is a mandatory document for the seasonal workers that costs less than USD 20. However, the certificate is issued from only two locations in the country. As a result, each year the seasonal workers need to travel to one of those locations, spend a week or more waiting for the certificate. An assessment found out that they need to spend up to USD 500 on travel, accommodation, food and other costs. If opportunity costs for missing wages, rescheduling flights are calculated, then the total cost for each person would be much higher than USD 500. And all of these are just to get a document for which the official fee is less than 4% of the total expenses. UNCDF supported the Vanuatu Police Fore in digitizing the application and certificate issuance process so that people can apply from their homes without needing to travel and receive the certificate online in due time. This shows how an effective public service can reduce the difficulties for the citizens, increase productivity and economic opportunity. SIDS countries face such unique challenges that for them public service digitization can be a blessing. Once, I met someone in Vanuatu who could not go to a bank for more than 15 days because it took over three hours by boat to reach the island where the bank was located. There was no bank on his home island. Due to adverse weather and cyclone warning, boats were not allowed to travel between the islands. This type of situation is very difficult to imagine in larger countries. My firsthand experiences tell me that for SIDS the solutions need to be different and looking at the capacity of the governments an MSD approach may offer some solutions to digitize public services faster.

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Applying MSD to Digital Public Services in SIDS

Mapping the Digital Service Ecosystem in SIDS: The first step in applying MSD to digital public services in SIDS would be to map out the entire ecosystem. This process might reveal unique actors and relationships specific to island contexts:

o?? Government agencies (often with overlapping mandates due to small size)

o?? Local and international technology providers

o?? Telecommunication companies (often with monopolistic or oligopolistic structures)

o?? Diaspora communities (potential sources of skills and investment)

o?? International development partners

o?? Regional organizations (e.g., Caribbean Community, Pacific Islands Forum)

o?? Local communities and traditional leadership structures

Understanding this ecosystem would help to identify systemic constraints, system failures, opportunities, and potential leverage points for intervention. This exercise would capture the current scenario of the complex relationships, Interconnectedness and dynamics among the actors involved.

Identifying Systemic Constraints in SIDS in relation to public service delivery: SIDS face unique systemic constraints for public service delivery. Some of these challenges are:

·?????? Manual public service delivery, which is time consuming, error prone and lacks flexibility.

·?????? Lack of policy for using alternative public service delivery channels.

·?????? Lack of financial strength for revamping public service delivery.

·?????? Shortage of human resources involved in public service delivery.

·?????? Lack of capacity in public services to efficiently deliver public services.

Apart from these there are other socio-cultural impacts from each SIDS country that created unique dynamics for each country. Unfortunately, these constraints are not the only ones to be addressed. There are also several challenges involved specifically for digital public service delivery:

·?????? Limited and expensive internet connectivity.

·?????? Vulnerability of digital infrastructure to natural disasters.

·?????? Small market size, limiting private sector interest.

·?????? Migration of skilled IT professionals from SIDS countries.

·?????? Limited government capacity and resources.

·?????? Cultural factors influencing technology adoption.

·?????? Dependence on external funding for large-scale projects.

·?????? Lack of digital literacy and open payment ecosystem.

All of these contribute to the added complexity of public service as a sector. Though all these challenges may make the situation look unbelievably complex, the good news is that if the crucial challenges are addressed, the situation would look much different.

Designing Tailored Interventions using MSD: Based on these constraints, MSD-inspired interventions for SIDS might include:

a) Improving Connectivity:

·?????? Facilitate public-private partnerships for low-cost internet connectivity.

·?????? Encourage regulatory reforms to promote competition in internet connectivity through different options like satellite, submarine cable and other technologies.

·?????? Utilizing policy tools to make the private sector invest in remote areas. For instance, Vanuatu has a “play or pay” mechanism in the Universal Access Policy (UAP) that dictates if the internet provider does not provide service to the remote areas, then the provider must “pay” a fixed amount to the government as a fee for not “playing”.

b) Addressing Market Size Limitations:

The market size is too small for most of the SIDS to attract large private sector investments. This makes the push of digitization or scaling quite difficult. Because even though the services are government owned, strong private sector support will be needed for the government to be able to offer the services through digital platforms. One potential approach could be taking the leverage of collective economies of scale: ??

·?????? Fostering regional cooperation for shared digital platforms.

·?????? Encourage the development of solutions that can be easily adapted across different SIDS.

Tackling Brain Drain: Brain drain is quickly turning out to be one of the key challenges that SIDS countries are facing. It is creating talent vacuums in different sectors and increasing dependency on foreign players on jobs that should have been filled by domestic talents. The potential solution could be: ??

·?????? Creating incentives for skilled people to remain in the local economy through local talent retaining initiatives.

·?????? Develop local training programs in partnership with international institutions to increase the number of skilled resources available in the domestic market.

Enhancing Government Capacity: Like every developing country SIDS also face the issue of capacity within the government to manage digital public service delivery. The following interventions could be useful to increase the government capacities.

·?????? Facilitate knowledge exchange programs with other SIDS and developed countries.

·?????? Promote modular, scalable solutions that do not overwhelm limited government resources.

·?????? Design capacity development program in such a way that the requirement to learn necessary skills becomes mandatory for career progression.

Ensuring Cultural Relevance: The SIDS countries have remarkably similar or unique cultures but not the same culture. It is particularly important to ensure that the cultural sensitivities, nuances and contextualization are considered in designing any solution that could be used regionally. The potential solutions could be to engage local communities in service design to make sure the solutions are context sensitive, accessible, inclusive, and acceptable by the local communities.

Sustainable Financing: For SIDS countries financing will be one of the significant issues as substantial investments will be needed for public service transformation. The governments may not be able to provide the required financing. In that case innovative solutions are needed to address the financing issues.

·?????? Explore innovative financing mechanisms like impact bonds or other blended financing mechanisms.

·?????? Development regional pooled funding by involving multilateral organizations to design solutions that could be used by multiple SIDS with little customization.

·?????? Facilitate partnerships with international tech companies for reduced-cost services.

·?????? Experiment with private sector investment for public service digitization and revenue sharing through service delivery to offset the upfront investment by the government.

Facilitation Approach in SIDS Context: Given the small size and close-knit nature of many SIDS communities, the government's facilitation role might look different. The burning question here is who the facilitator for this would be. From the socio-political analysis, it seems that a regional organization in partnership with specialized multilateral organizations could be the facilitator as the solution may need multi-country arrangements for cost efficiency. For instance, instead of depending on private sector cloud services if the SIDS governments of a region build their own datacenters to serve the countries through a regional organization, it will ensure long term lower cost, data privacy and data sovereignty.

Among the many benefits of SIDS two of key benefits I feel would be critical for the sustainability of the approach. The first one is the boost in the technical jobs in the region and increase in the regional capacity in developing digital solutions that can further help other developing countries through South-South cooperation models.

The national governments and political instability may rule out government bodies as the facilitator to initiate the changes. The convenor will require to perform the following.

·?????? Bringing together diverse stakeholders including traditional leaders.

·?????? Collaborate closely with regional organizations to pool resources and knowledge.

·?????? Engage diaspora networks to bring in external expertise and investment.

·?????? Partner with international organizations while ensuring local ownership.

·?????? Engage with technology providers for collective bargaining to ensure better deals for technology solutions.

Ensuring Sustainability and Scale

For the SIDS countries sustainability is a challenge and scale are relative considering the population of the region. However, in the long term the importance of local ownership and self-reliance for digitization of public services it will certainly require a lot of planning, collaboration, and persistence to move towards a direction where the public service digitization would become simple and straightforward from the perspective of technology, maintenance, and service continuity. This can only be achieved in the long term through adaptive management. The idea is to create a regional market for key technological solutions, digital infrastructure, skills, and systems that any of the countries in the region can take advantage of.

Sustainability and scale take on different meanings in the SIDS context:

The following could be the key characteristics for sustainability and scale:

·?????? Focusing on solutions that can be maintained with limited local/regional resources.

·?????? Design for interoperability to allow easy adaptation across different SIDS.

·?????? Build local capacity not just within government, but across the broader community in the region.

·?????? Consider regional scale rather than just national scale.

·?????? Plan for shared digital public infrastructure for the region.

·?????? Explore different models for public services digitization like BOT, PPP, JV, Outsourcing, DBFOM etc.

Challenges and Considerations Specific to SIDS

The outcome of using MSD approach for public service digitization for SIDS may sound like a utopian scenario where everything comes together to solve the problem, unfortunately in reality there are many different challenges and complexities. I have tried to list some of the significant ones.

1.??? Balancing Standardization and Customization:

When we are talking about regional cooperation and economies of scale the standardization, common requirements and customization could become very difficult to balance among multiple countries.

2.??? Managing External Influences:

SIDS often rely heavily on external funding and expertise. An MSD approach must carefully manage these influences to ensure local ownership and sustainability.

3.??? Adapting to Rapid Technological Change:

Even the developing countries are finding it difficult to keep up with the technology development with relevant policies. With limited resources, SIDS must be strategic in adopting new technologies, focusing on flexible, future-proof solutions.

4.??? Disaster Preparedness and Continuity:

SIDS are more vulnerable to the climate change and increasingly frequent natural disasters. Digital services in SIDS must be designed with disaster resilience in mind, ensuring continuity of critical services during natural disasters.

5.??? Data Sovereignty and Cybersecurity:

With increasing reliance on cloud services hosted abroad, SIDS must navigate complex issues of data sovereignty and cybersecurity.

6.??? Regional Cooperation and facilitating body:

Through the cooperation among SIDS are strong but there are doubts about if a body that can act as the facilitator for the MSD approach. The body needs to have the vision, policy making & implementing authority, management capacity, resources, capacity to implement regional projects, and mandate to bring the governments together for achieving the regional vision beyond national interests. For any existing SIDS regional body this will be a colossal responsibility that will require a few years preparation.?

Conclusion

The application of MSD principles to digitize public services in SIDS countries represents a promising approach to overcome their unique challenges and leverage their strengths. By viewing digital public services as part of a broader regional ecosystem and focusing on facilitation rather than direct implementation, SIDS governments can catalyze sustainable improvements in service delivery despite resource constraints.

?This approach requires a shift in mindset, moving from isolated, one-off project-based interventions to a more holistic, systems view of digital transformation. It requires new forms of collaboration - between government agencies, in collaboration with the private sector, with local communities, and across national borders. It also requires careful consideration of the unique cultural, economic, and environmental contexts of each island nation. This approach can help to build regional digital commons, circular economy based digital solutions, climate-Resilient digital infrastructure and more to accelerate the economic growth and quality of life for SIDS.

However, the potential benefits are significant. Effective digital public services can help SIDS overcome geographical disadvantages, improve resilience against natural disasters, enhance economic opportunities, and deliver more efficient and accessible government services for the remote communities. Moreover, by fostering local innovation ecosystems, this approach can help SIDS move beyond being passive consumers of imported technologies to become active participants in the digital economy.

?The journey towards MSD-driven digital public services in SIDS is not without challenges. It requires careful navigation of issues around connectivity, capacity, culture, and funding. It demands a delicate balance between leveraging external resources and ensuring local ownership. And it requires patience, as systemic changes take time to manifest.

?By embracing the principles of Market Systems Development, SIDS can turn their small size from a constraint into an advantage, becoming agile innovators in digital governance. The future of digital public services in SIDS should not be about importing solutions from elsewhere, rather about fostering local and regional innovation ecosystems that can create contextually appropriate, sustainable solutions. With the right approach, guided by MSD principles, SIDS can turn the digital development for public services into a powerful tool for sustainable development, improving the lives of their citizens and securing their future in an increasingly interconnected world. As a development practitioner working with MSD and digital development in a SIDS country, I believe this approach can make a difference to the existing status que and a long list of not-so-successful attempts at digitizing public services across SIDS.

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