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Many small states1 manage to generate a relatively high GDP per capita compared to other developing countries2 in spite of their high exposure to external economic shocks. This would seem to suggest that there are factors which may offset the disadvantages associated with such vulnerability. This phenomenon is termed by Briguglio (2003) as the ‘Singapore Paradox’, referring to the fact that Singapore is highly exposed to external shocks, and yet this island state has managed to register high rates of economic growth and high GNP per capita. This reality can be explained in terms of Singapore’s ability to build its economic resilience.

Economic vulnerability is well-documented in the literature from both the conceptual and empirical viewpoints (see for example Briguglio 1995, 2003; Crowards 2000; Atkins et al. 2000). Most studies on economic vulnerability provide empirical evidence that small states, particularly …