Comments

"Economic stability is an achievement. Structural transformation is the real test. The true measure of development is not how long a country can sustain external support, but how effectively it transforms that support into self-sustaining prosperity." I found the article particularly insightful because it extends the MIRAB model beyond economics into the realm of political economy. The concept of a "stability trap" is especially compelling: remittances and aid not only protect households and public finances, but may also weaken the political urgency for structural reforms, domestic revenue mobilisation, and economic diversification. However, I believe the discussion could be taken a step further. The stability trap may also reflect path dependency, where prolonged reliance on external finance gradually shapes institutions, public expectations, and policy choices in ways that make structural transformation increasingly difficult. It also raises an important question of moral hazard: if external inflows continuously cushion economic shocks, do governments and citizens face fewer incentives to undertake politically difficult reforms? Viewing MIRAB alongside New Structural Economics (Justin Yifu Lin) suggests that aid and remittances should be treated as catalytic capital rather than permanent income support. Instead of financing recurrent consumption, they should build productive infrastructure, human capital, innovation ecosystems, digital transformation, and competitive industries. Likewise, Benefits Realisation Management (BRM) reminds us that development should be evaluated not by the amount of aid disbursed, but by the lasting public value it creates - higher productivity, stronger institutions, diversified exports, quality employment, and fiscal resilience. The comparison between Tonga and Mauritius is particularly instructive. Despite similar structural constraints as island economies, Mauritius successfully transformed itself through strategic industrial policy, investment in education, institutional quality, and economic diversification. As Acemoglu and Robinson argue in Why Nations Fail, inclusive institutions - not geography or external resources alone - ultimately determine long-term prosperity. Another dimension worth exploring is the transition from remittance dependence to diaspora investment. Rather than serving primarily as a source of household income, diaspora communities could become investors, entrepreneurs, mentors, and knowledge partners. Similarly, the blue economy, digital services, renewable energy, and climate-resilient infrastructure provide opportunities for SIDS to convert external finance into sustainable sources of productivity and competitiveness. Perhaps the article also invites us to distinguish between resilience and competitiveness. A country can become highly resilient to external shocks while still failing to increase productivity, innovation, exports, and domestic value creation. Ultimately, the central issue is state capacity - the ability of governments to transform external finance into long-term public value through effective institutions, adaptive governance, and evidence-based policymaking. Perhaps the next evolution of the MIRAB framework is not simply to explain why dependency persists, but to identify the institutional tipping points at which external finance transitions from consumption financing to productivity financing, allowing stability to become a foundation for structural transformation rather than a source of institutional inertia.

Ron and Rita were lovely people to know. Ron was a warm economics colleague at USP when we were going through difficult times. We also shared a passion for golf which we enjoyed at the rough courses around Fiji.

A true friend of the Pacific. Ron's work, among his contemporaries (Standish, May, Hegarty, etc.) have influenced my own academic and research interests. Pacific scholarship becomes poorer with your passing. Vale, Prof Duncan.

Great piece of thought! Just some side observations. We have heard of other fields of diplomatic relationships across borders and continents, not so often we heard of rugby diplomacy as the case between Aussie and PNG. In fact, it's not PNG entry into Aussie NRL, it’s only an expansion of Aussie NRL teams, not like the entry of Kiwi into NRL. The notion that PNG entry into NRL will transform and unite all PNG holds not water, we never witnessed any impact changes with the PNG LNG project or other major developments, let along rugby diplomacy. The media fantasies are only a hallucination. The approach by Aussie was a reactionary action against geopolitical and regional footprints of the Dragon in the Pacific. The rugby diplomacy will even give the Dragon more rooms to diversify its footprints in PNG and across the Pacific in a more substantial and impactful diplomacy than rugby fanfare. PNG need to understand the mechanics and dynamics of geopolitical wave and regional powerplay in the Pacific, both Kangaroo and Dragon have invited themselves to PNG shores and PNG have to grasp this opportunity in a way that will bring everlasting impact than fantasies of 80 minutes clapping and shouting in the hot sun.

A thought-provoking article. It was a pleasure for USP Journalism and the Discipline of Economics to co-host Naren’s talk on this same important topic at the Laucala Campus recently. Labour mobility, migration, remittances, and skills shortages regularly feature on the news agenda across the Pacific, especially in Fiji. Normally, the media are accused of being too negative, yet on this issue the coverage tends to be largely positive, which is fine. But is it telling the full story, or both sides of it? Concerns about skills migration and labour shortages are reported, but the focus is mainly on increases in remittances, which are seen and celebrated as contributing to economic development, as are new labour mobility opportunities and ODA, often announced through media conferences accompanied by positive messaging from the government of the day. There is little doubt that remittances and development aid have brought significant benefits to many Pacific families and economies. However, as Naren argued, there is also a risk of fostering greater dependency, creating a false sense of security, and diminishing the urgency of building long-term domestic capacity if not managed carefully. That is, constantly delaying and postponing the inevitable. While the immediate and medium-term gains are evident and welcomed, equal attention should be given to the longer-term risks and implications for economic resilience, productivity, and skills development. It is not an easy puzzle. Governments tend to prioritise pressing and immediate needs, and in doing so, longer-term strategic objectives can sometimes be deferred—or even abandoned. It is challenging because young people are attracted by higher wages and better opportunities abroad. The question is, how competitive can Pacific Island countries realistically be, given longstanding structural constraints such as geographic isolation, vulnerability to climate and natural disasters, small domestic markets, and limited economies of scale? Under such circumstances, how much local capacity-building is possible, and can it really compete with countries such as Australia and New Zealand? This is clearly an important discussion that deserves wider attention. Kudos to Naren for drawing attention to the other side of the equation, beyond the immediate benefits; to get out of the comfort zone and think more critically about the longer-term outlook.

Excellent paper, Sir. Very informative and useful for remittances and outmigration relationship and growth models.

A thought-provoking piece: thank you Drs Prasad and Ramachandram. I agree with all that has been argued. The economic-political nexus between remittances and aid in small states deserves deeper and wider research, at both household and national levels. Reference is made to the MIRAB model - MIgration, Remittances, Aid, Bureaucracy - which considers interactions between remittances and aid in an economic sense: this blog argues that their political interaction matters and remains understudied. What also needs to be studiesd is the transition away from MIRAB that is documented widely from small state development trajectories. Prasad and Ramachatman might give the impression that MIRAB 'locks' small states in a structural dependency from which there is no way out. However, the literature spawned by the MIRAB idea - which should be credited to Geoff Bertram as well as Roy Watters - suggests that there is a dynamism in the system, triggered by both opportunity and crisis - for small state scholars and practitioners, no surprise there. Tourism offers a way out of the impasse, generating a significant private sector response - and leading Jerome McElroy to propose the SITE (Small Island Deveoping State) acronym as a possible form of graduating from MIRAB. Then I contributed to the debate by proposing an even higher-order form of small island development, built on policy competences: People, Resource Management, Overseas Engagement, FInance and Transportation (PROFIT). Hence, we have a 3-way typology, with lots of oscillations happening to and fro. Let's keep the conversation going; but, more than that: I would really recommend some serious research on this pertinent topic.

Appreciated this piece highlighting the paradox of remittances and aid in small states. A follow‑up focusing on practical pathways out of the “stability trap” with examples of domestic reforms, capacity‑building, and case studies would make the analysis even more actionable.

This is, in my view, a more helpful way to think about remittances (cf., macro aid, etc) https://onlinelibrary.wiley.com/doi/abs/10.1111/dpr.12471 Open access via CGD website - Migration and Household Finance https://www.cgdev.org/publication/migration-strategy-household-finance-research-agenda-remittances-payments-and

Thanks Terence. I've just noticed this on the ABC's wesbite: https://www.abc.net.au/news/2026-07-28/new-lowy-pacific-aid-map-australia-lending-investor/106967764. "Australia has supplanted China as the dominant lender and infrastructure investor across the Pacific as the government ploughs billions of dollars into the region through both foreign aid and loans." Which again focusses on the input of "expenditure" (versus China). The survey lost an opportunity to present those findings to the general public and advise/inform/educate the public on the value of benefits to the recipients. Even if they might be prospective benefits.

Thanks all. It will be interesting to see if this trend continues. Conventionally, few strong parties often develop around policy areas. What makes the low fragmentation (few big/strong parties) in PNG interesting is that it’s happening without clear ideological differences between parties, or sometimes parties with no policies at all. The traditional “charisma” argument has it’s limitations: Gary Juffa, for instance, one of the most charismatic leaders of this decade has not had more than one MP elected under his party in successive elections. Post-elections, his party numbers didn’t grow beyond himself. This is the same with Bryan Kramer. We will wait to see how Allan Bird fares in 2027 with a new party. One way to think about this phenomenon is that the State has increasingly become the major source of resource allocation to MPs. This takes the form of constituency development funds (DSIP/PSIP), the executive determining where donor funding goes, and ministerial allocation, among other things. Whilst the last point has always been there, the former two have become more important in recent decades. So as a MP, the question you ask is: how do I maximise my chances of accessing state resources? Do I remain independent, or as part of a small party? Or do I join one of the bigger parties and let the party negotiate, or negotiate as a member of a big party? The best option is of course the one: you improve your access to state resources, which is allegedly controlled by the prime minister. Big parties matter to the prime minister because he’s always under threat of a vote of no confidence. So joining one of the big parties makes you “visible” to the prime minister, and improves your access to state controlled resources. To remain a one man party, you need to be a Gary Juffa or Bryan Kramer. To remain independent, you have to be an Allan Bird. So charisma is still relevant because charismatic leaders can be visible without a big party. But charisma can no longer command a following, or maintain followers. The allocation of donor projects is an interesting thing to watch. The need for roads and bridges is common across PNG. But where exactly does the government direct donor assistance for bridges and roads? Does it go to opposition MPs or government MPs’ electorates? Does it go to single party MP’s electorate or electorates of one of the bigger parties?

Totally agree, Maho, if you can confirm the data, that would be very interesting. In my presentation and the blog Terence help to do up for ENP, I was tempted to put forward the impact of electoral change ( LPV) on party visibility togther with ENP as accessing and getting the appropriate data and calculating it is a bit difficult for me. My take is given 2027 election I hope you and Michael and Terence can confirm. I held the belief that incentives in the LPV together with Section 63 of OLLIPAC is having an impact on Party visibility. I really hope you continue this.